The Reserve Bank of India has asked banks not to report low-value transactions done through digital rupee in order to ensure that India’s Central Bank Digital Currency (CBDC) offers the same level of anonymity that cash does.
The directive will allow the virtual currency (e₹-R) to be at par with cash currency with respect to business transactions below a certain value.
The e-Rupee transfers to customer wallets will not be tracked or reported by banks, as the transactions “won’t leave a trace in the core banking system”. This will make transfers more anonymous than current digital transactions, bankers told Economic Times.
Currently, Personal Account Number (PAN) is required to be furnished to banks to make digital transfers over Rs 50,000 in value. Although, the RBI has not specified the limit for anonymous digital rupee transactions, but the it is believed to be same as the threshold value for normal digital bank transfers. CBDC-R transactions above Rs 2 lakh will need to be reported for tax purposes, the report added.
The digital rupee provides greater anonymity since the money will not be transferred to the beneficiary’s bank account but a special wallet. Transfers below the Rs 50,000 will not be reported once the money enters the wallet, a banker told ET.
Although the RBI will know the total amount of CBDC-R in circulation, the central bank will not know who owns how much of the virtual currency.
According to bankers, after the initial purchase of CBDC from the central bank, the next transaction made by the buyer will be not reflected in the bank account. This is totally different from UPI, wherein the bank has a detailed view of such transactions.
It is to be noted that RBI is still working on the aspect of CBDC’s anonymity, and will take time to formally announce clear rules, reconciling these with money laundering norms and other requirements.
The Reserve Bank announced the launch of the first pilot for retail digital Rupee (e₹-R) on December 01, 2022. Select users will get a CBDC wallet with digitally printed notes, carrying the signature of the RBI Governor.
