Reliance Retail, one of India’s largest retail chains, said it will start accepting payments from customers in the form of digital rupees, as India pushes ahead with the adoption of its nascent Central Bank Digital Currency (CBDC).
The move has the potential to set the tone for CBDC adoption across many parts of Asia, said experts that DealStreetAsia spoke to.
“The forthcoming tests on platforms like Reliance Retail will provide valuable insights for the [Asian] region and beyond. It can become a playbook for neighbouring countries and Southeast Asia,” said Anurag Dixit, founder of Kunji, a crypto asset management platform.
“The implementation of CBDCs is poised to bring a significant reduction in settlement times, increasing the speed and efficiency of commerce. The reduced friction in the payments process will drive growth and create new opportunities for financial products based on CBDC primitives,” added Dixit.
Reliance Retail is part of the Indian oil-to-telecom conglomerate Reliance Industries run by billionaire Mukesh Ambani. Its various divisions sell groceries, jewellery, apparel, footwear, electronics, and toys among other things, through over 17,000 stores across over 7,000 cities in India, according to its website.
The retailer said it has partnered with ICICI Bank, Kotak Mahindra Bank and fintech firm Innoviti Technologies to allow customers to make payments at its stores, starting with its gourmet food store Freshpik.
The huge retail interest in crypto assets in the last few years has prompted central banks across many Asian countries to launch blockchain technology-backed CBDCs as an alternative to private crypto coins, whose volatile nature has stoked fears of systemic risks to the financial system.
While India has not banned cryptocurrencies per se, the Reserve Bank of India (RBI), the country’s apex bank, maintains that virtual digital assets need more scrutiny. Last year, the Indian government stipulated a flat 30% tax on income from crypto investments including a 1% tax deducted at source (TDS) for each trade. The high tax rate had sparked criticism from crypto supporters.
About 100 central banks worldwide have plans to launch or have already launched digital currencies. This includes China, the US, the UK, Sweden, Japan, Sri Lanka, and India.
China’s e-CNY project is already in the pilot phase. Recently, the US released its executive order on digital assets, which lay the ground rules for building a digital dollar. In September 2022, the Swedish, Norwegian and Israeli central banks launched a project with the Bank for International Settlements to test international retail and remittance payments with central bank digital currencies, according to Reuters.
In Southeast Asia, only Cambodia has launched a CBDC so far.
CBDCs aim to combine the benefits of traditional fiat currencies with the efficiency and security of digital currencies. Unlike cryptocurrencies such as Bitcoin, CBDCs are regulated by central banks and are often designed to be used as a complement to existing fiat currencies rather than as a replacement.
Late last year, the RBI launched its pilot CBDC project. “Developing CBDCs could provide the public with a risk-free virtual currency that will provide them with legitimate benefits without the risks of dealing in private virtual currencies,” the central bank had said.
“CBDC will be better than the UPI system [a popular real-time digital payments system launched by the National Payments Corporation of India]. Transactions will be anonymous and protected. Moreover, acceptance across 17,000 Reliance Retail stores will play a role in getting CBDC adopted,” V Subramaniam, managing director at Reliance Retail said.
“We are moving towards a Digital Bharat ecosystem, and a step like this would significantly boost the adoption of CBDCs among the retail players,” said Abhijit Bhattacharya, Founder and Chief Business Officer, OneGreen, an online shop for organic goods. Bhattacharya said that adding the digital rupee to OneGreen’s current list of organic products would enhance the customer experience.