Last November, the Reserve Bank of India launched its first wholesale CBDC pilot to settle government bond transactions. This week it started using the central bank digital currency (CBDC) in the call money markets for interbank lending, MoneyControl reported. The central bank has not confirmed the news but previously stated it was planned.
By February enthusiasm waned for the government bond settlement pilot and several days passed with zero transactions.
The latest pilot involves the same nine banks as the first pilot, with the addition of Federal Bank.
Intraday transactions is a popular area for interbank blockchain solutions, and the call money markets are consistent with that. In other jurisdictions, multiple blockchain solutions target intraday repos (JP Morgan, Broadridge). And UK startup Finteum is working on FX swaps.
While blockchain enables instant atomic settlement, an even bigger advantage can be programmability. For call money markets, that means if one bank lends to another, it may need the funds to be returned at a specific time. That can programmed into a smart contract, ensuring a delay is not possible.
Additionally, there’s the potential to tokenize the collateral used for loans. However, we’re not convinced this is part of the current trial. Earlier this week, JP Morgan launched a platform where money market funds can be tokenized and used for collateral.
Meanwhile, retail trials of the digital rupee are progressing, and the central bank is working with the UAE on cross border payments. An Indian Treasury Minister recently observed that he expects the adoption of a retail CBDC to be faster than a wholesale CBDC, especially for cross border payments.
Wholesale CBDC elsewhere
While retail CBDC projects have grabbed headlines worldwide, there has been a renaissance of interest in wholesale CBDC, partly driven by tokenization. The EU will announce concrete plans shortly, and Brazil and Korea are both conducting pilots to support DLT projects using tokenized deposits for settlement. The wholesale CBDC will be used for interbank settlement of the tokenized deposits.