India’s CBDC has got off the ground but where it goes next will depend on how deftly it’s managed

India’s central bank digital currency (CBDC), or e-rupee, is finally emerging from the shadows. It is being tested in the domestic economy through managed programmes. But it will face its toughest test as a cross-border payment tool. As many developed and developing economies mount a challenge to dollar dominance, the e-rupee will invariably be seen as a strategic tool in these geo-economic power struggles.

But, before unpacking all that, take a look at a global CBDC tracker, housed in the Washington DC headquarters of think-tank Atlantic Council.

The tracker’s July 2025 report had found after scanning CBDC pilot projects across the globe that India’s e-rupee was the world’s second-largest CBDC pilot, behind only the digital yuan. Digital rupee in circulation had reached ₹1,016.5 crore by March 2025, up 334% over ₹234 crore in March 2024.

While the figure for March 2026 is not available, Reserve Bank of India (RBI) deputy governor T. Rabi Sankar provided an update last month: “As far as users are concerned, they are increasing gradually, now there are 1 crore users, there have been nearly 15 crore total transactions of about ₹34,000 crore…”

The deputy governor’s update indicates an increase in usage, both at the retail and wholesale levels. While some retail uses may have been introduced for India’s CBDC, it is perhaps a bit early to transact in this currency freely at your local supermarket. The e-rupee’s impact on the monetary system is also limited at the moment. A recent research note from State Bank of India noted that it is limited to 0.03% of the total currency in circulation.

At the same time, it is also unlikely that the rupee CBDC will go fully retail. Speaking on the sidelines of the Fund-Bank meetings in October 2025, RBI governor Sanjay Malhotra had categorically stated that its CBDC was not that vital for the domestic economy because India already had an effective, fast and cheap payment system in the popular Unified Payments Interface.

“CBDC actually is the answer for cross-border payments. We need to promote the CBDC because this has huge advantages over stablecoins. It is fiat.”

There are two ways to understand this duality of domestic and yet-not-domestic characteristic.

At one level, some CBDCs issued for use in the domestic economy come programmed for use within specified limits. The government and RBI are jointly testing CBDCs, programmed for specific end-uses, such as benefit transfers. For example, a CBDC distributed for food programmes can be used only at some designated ration shops or for a farm subsidy at select fertiliser outlets, allowing for a modicum of usage tracking. Many other central banks are also making their CBDCs programmable.

On the other hand, CBDCs issued to the general public outside the pale of benefit transfers will have to adhere to the commitment of greater privacy protection. This is likely to result in two types of CBDCs circulating in the system: one where the central bank has some idea of usage and the other where there might be some veil of secrecy. This could potentially lead to complications.

What compounds the complications is the nature of the veil—probably more translucent than opaque. Welcome to the other feature of Indian CBDCs: intermediation.

Under this, RBI will mint the CBDC and distribute it electronically to banks and non-banks which, in turn, will be responsible for on-boarding customers and transferring CBDCs to their e-wallets. Customers can use these CBDCs as currency for payment to individuals or merchants. There are some misgivings about the line-of-sight that intermediaries will have over their customers’ spending patterns.

These tricky questions will remain unresolved till the e-rupee is in pilot stage, with RBI continuing to test the technology, architecture, scalability, acceptance and use cases. These tests and use-cases will finally determine the guardrails RBI decides to erect around the digital rupee in the domestic economy. But the real test for the digital rupee will probably come from its cross-border usage.

It is well known that CBDCs hold the potential for rapid de-dollarization. Atlantic Council’s tracker shows at least 15 cross-border CBDC projects. RBI has already engaged bilterally with Singapore and the United Arab Emirates to test the e-rupee’s interoperability with other currencies. RBI has also joined multilateral projects launched by the Bank for International Settlements. This profusion of cross-border projects will need to be watched closely, making demands on RBI to choose carefully.

There is a larger problem: cross-border CBDCs remain experimental while international usage of cryptos and stablecoins has been increasing apace, reviving concerns over a resurgence of money laundering and financing of terrorism. And, yet, the bar for any central bank like RBI is set high—any technological solution must continue to foster trust and integrity in official money and settlement systems, balancing privacy with regulatory intent.

The author is a senior journalist and author of ‘Slip, Stitch and Stumble: The Untold Story of India’s Financial Sector Reforms’ @rajrishisinghal