India to make its digital currency programmable

Reserve Bank also wants a national 2FA framework

The Reserve Bank of India (RBI) announced on Thursday it would make its digital currency programmable, and ensure it can be exchanged when citizens are offline.

The country's current CBDC retail pilot launched in late 2022. It already enables both person-to-person and person-to-merchant transactions. Apparently, that's going well enough for RBI to add more functions.

"It is now proposed to enable additional functionalities of programmability and offline capability in CBDC retail payments," stated RBI in its latest monthly governor's statement. "Programmability will facilitate transactions for specific/targeted purposes, while offline functionality will enable these transactions in areas with poor or limited internet connectivity."

India has plenty of those – both in remote locations and in its mountainous regions where it's hard to create pervasive mobile networks.

The new functions are to be introduced gradually through more pilot programs.

Indian media report that governor Shaktikanta Das outlined scenarios for the programmable digital rupee, including allowing government agencies to ensure payments to citizens are only used for defined benefits. Businesses, he added, could "program specified expenditures like business travel for their employees." Das even envisaged digital cash being tied to geographical areas.

RBI's e-rupee plans extend beyond making programmable and offline CBDCs. It plans to put in place a principle-based framework for authentication of digital payment transactions. It has already tested additional factor authentication – including SMS-based OTP – but would like some more options.

In the governor's message, RBI chief general manager Yogesh Dayal framed these initiatives as an economic development accelerator.

"At the current juncture, India's potential growth is propelled by structural drivers like improving physical infrastructure; development of world class digital and payments technology; ease of doing business; enhanced labour force participation; and improved quality of fiscal spending," asserted Dayal.

Another way India is looking to build its digital economy is by allowing itself to tax more of it. Bloomberg reported the nation will call for the end of a 1998 agreement not to tax digital goods. If India succeeds, tariffs could be allowed on a wide range of items – from software downloads to video games.

India has argued that the current international agreements cause loss of tariff revenue and affect its trade competitiveness. ®

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