India’s largest retailer Reliance Retail is accepting the Reserve Bank of India’s Digital Rupee (e₹-R) Central Bank Digital Currency (CBDC).
Customers can pay with Digital Rupees at some Reliance Retail stores, TechCrunch reports. Shoppers will use a quick read (QR) code they scan with their phone to pay with digital rupees.
They will first test e₹-R at Reliance’s Freshpik gourmet grocery store. If Digital Rupees work at Freshpik, Reliance will accept them at all of its stores. Reliance partners with Kotak Mahindra Bank, ICICI Bank, and Innoviti Technologies to process e₹-R payments.
Retail Giant Accepting Digital Rupee (e₹-R)
Reliance Retail is the retail arm of Indian conglomerate Reliance Industries Limited. Reliance Retail operates 15,196 stores in 7,000 Indian cities and 500 distribution centers in 28 Indian states.
They claim Reliance serves five million customers each week and has 200 million people in its loyalty card program. Reliance operates four retail brands, the Avntra by Trends clothing store, the Freshpik grocery stores, the Fresh Signature supermarkets, and Reliance Smart Supermarkets. Reliance reported revenues of 1,99,704 Cr ($26.3 billion) in 2021.
Reliance claims to be India’s largest online grocer, biggest online fashion destination, and largest and consumer electronics retailer. Hence, India’s largest retailer is testing the Digital Rupee (e₹-R).
What is the Digital Rupee?
The Reserve Bank of India (RBI) began testing the Digital Rupee (e₹-R) on 1 November 2022.
A CBDC is an official cryptocurrency, a nation’s central bank issues. The RBI is India’s central bank, which issues the nation’s currency the Rupee.
Around 500,000 people were using the Digital Rupee in February 2023, the RBI claims. The RBI also claims 5,000 merchants in four cities are accepting Digital Rupees in February 2022. Eight banks in four cities, Mumbai, New Delhi, Bengaluru and Bhubaneswar, were testing the e₹-R in December 2022.
Banks processed 770,000 e₹-R transactions in November and December 2022. The RBI is trying to counter India’s growing cryptocurrency industry. There were around 15 to 20 million digital traders in India who had around $5.2 billion crypto. India’s parliament has levied a 30% tax on crypto investments.
India banks, including ICICI Bank Limited, began accepting Digital Rupee payments in February, Pymts.com reports.
Is the Digital Rupee a Threat to the US Dollar?
I think the Digital Rupee threatens the US dollar because of its low price. For example, the Rupee was worth 1.2₵ on 5 April 2023.
Hence, the Digital Rupee offers more buying power and opportunities for speculators. To explain, a speculator could buy 100 rupees for $1 US dollar. That alone could drive its adoption.
Cheap currency can drive trade. Indian imports from Russia were 16 times higher in November 2022 than before the start of the Ukraine War, The Economic Times reports. One reason for the import growth is the Russian Ruble’s low price. The Ruble was trading at 1.2₵ on 5 April 2023. Hence, Indians have as much buying power in Russia as back home.
Russian imports are so cheap in India, Reserve Bank economists are worried they will undercut the Rupee and plans to increase its value, The Economic Times reports.
I predict trading markets for the e₹-R and its Chinese counterpart the eCNY could develop. Only time will tell if those markets create an alternative to the dollar market.
America lags behind in CBDCs
Thus, the United States is behind another major power in the CBDC race. The Federal Reserve is testing a CBDC in Project Cedar. However, that CBDC is only for wholesale or foreign exchange (FOREX) markets.
The Federal Reserve is planning an instant payment system they call FedNow. Crypto Saving Expert thinks FedNow could serve as an alternative to a CBDC. They claim FedNow can serve as a seamless payment system for everyday purchases for businesses, individuals, and banks. People could use FedNow to pay bills and make purchases at stores.
However, the Fed is reluctant to test a CBDC because of political pressure. For instance, Governor Ron DeSantis (R-Florida) a probable presidential nominee, supports legislation that “Expressly prohibiting the use of a federally adopted Central Bank Digital Currency as money within Florida’s Uniform Commercial Code (UCC).”
US Senator Ted Cruz (R-Texas) has introduced introduced legislation to “prohibit the Federal Reserve from developing a direct-to-consumer central bank digital currency” in Congress. Thus, CBDCs are a political issue in the Republican Party, which makes the Fed reluctant to go near them.
Can CBDCs Dethrone the Dollar?
Thus, American politicians are blocking citizens’ access to modern financial technologies because of hysteria. America lags behind its greatest rivals, China and India, in the critical technology of CBDCs.
I have to wonder how CBDCs such as the Digital Rupee and the Digital Yuan (eCNY) will affect the US Dollar’s reserve currency status. I suspect both the eCNY and the e₹-R will be popular with traders and speculators, which will affect the dollar. Only time will tell if CBDCs can dethrone the US dollar as the world’s most popular currency.
