RBI approves CRED to launch e₹ wallet, first fintech to roll out CBDC

Kunal Shah-led CRED has become the first fintech player to partner with the Reserve Bank of India (RBI) to launch an e-wallet pilot or Central Bank Digital Currency (CBDC), or e-rupee (e₹).

The Tiger Global and Peak XV-backed fintech will initially roll out the service to a select set of users. The company has roped in private lender Yes Bank to enable CBDC issuance.

Taking to X, Shah says CBDC is a fundamental shift in how India moves money. "CRED e₹ wallet beta is live. Not just another fintech play; CBDC is a fundamental shift in how India moves money: instant, programmable, RBI-backed. Starting with select members soon on this exciting journey," says the fintech founder.

He says he's "grateful to RBI for the vision and continuing their streak of being the most innovative regulator". The future isn't coming, it's here, he adds.

e₹-R is a digital token that has real value like rupee notes or coins. The RBI says CBDC will make transactions and currency exchange smoother, and it’ll boost financial inclusion.

Bigger players like GooglePay, PhonePe, and AmazonPay also aim to partner with the RBI on e-rupee, though they are yet to publicly announce the RBI's decision on the matter.

The retail digital rupee project, also known as e₹-R, was launched on December 1, 2022. It is still in a trial mode, with the RBI currently running a pilot project.

Initially, only four banks—State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank—in four cities were allowed to offer e₹-R. The RBI has said that the scope of the pilot would gradually be expanded to include more banks, users, and locations. The RBI's latest decision is expected to increase e-rupee transactions, and in the near future, more companies could also receive the central bank's approval to offer e-rupee services.

What is a CBDC?

CBDC is a legal tender issued by the central bank in digital form. Like rupee notes or coins, which are in physical form. Like fiat currency, it can also be exchanged between people.

Simply put, it's just like rupee (₹) notes but in digital form (e₹). You can also exchange e₹ for physical currency notes. However, unlike fiat currency that's usually stored in banks and hence their liability, CBDC is a liability on the RBI's balance sheet. That's why you don't necessarily need to have a bank account to own a digital rupee.

US has banned CBDC

The development comes amid the U.S. President Donald Trump banning the CBDC. Trump's order prohibited agencies from undertaking any action to establish, issue, or promote CBDCs within the jurisdiction of the US. It says that any ongoing plans related to the creation of a CBDC within the United States will be immediately terminated, and no further actions may be taken to develop or implement them.

Trump has also established the President‘s Working Group on Digital Asset Markets. Within 180 days of the date of this order, the Working Group will submit a report to Trump, which will recommend regulatory and legislative proposals that advance the policies established in this order.