In the recent post-monetary policy press meet, RBI officials took pains to assure the media that the e-rupee will be very similar to cash and that technology will be fine-tuned to ensure that there is anonymity of transactions without any digital foot-print. This assurance was necessary since anonymity will be the principal differentiator between the digital rupee and other forms of payments such as UPI, NEFT, IMPS etc. The central bank will issue digital rupee tokens, which will be transferred into the user’s digital wallet through the intermediary bank. Thereafter, there will be no tracking of payments made form the wallet including peer to peer, payments to merchants or other transactions, similar to physical money transactions.

But there is a catch. Anonymity will not be complete in e-rupee. As the Governor explained, just as cash transactions above a certain threshold need disclosure of PAN number, only small value transactions of e-rupee are likely to be anonymous. High value retail transactions will be tracked by the Income Tax and probably other departments of the government as well. Besides wholesale e-rupee (used in inter-bank and other large value transactions) will not be anonymous as these will be account-based.

The pilot has just been launched and the central bank will be making many tweaks to the design of the retail e-rupee and the technology in the coming years. But there are some questions that arise. Will all e-rupee transactions be made traceable in distant future, after the adoption and usage grows, in a bid to check tax evasion and curb the black economy? Will honest tax-payers, who do not care about anonymity, prefer to use bank-deposit linked payments, since they can be more remunerative? Will physical cash be completely phased out and replaced with digital cash? Is this the future of money? Only time will tell how this card is played by the policy makers.