Digital Cash
Chinese vs Indian
China’s Digital Yuan (e-CNY) is the most advanced in terms of scale and real-world use. Launched as a pilot in 2020, it’s been tested in over 20 cities, with transaction volumes reaching 7 trillion yuan ($986 billion) by June 2024 across sectors like education, healthcare, and public transport.
The Indian digital currency is a fledgling new born in comparison. NPCI lacks the tech muscle to give this digital currency the required technology muscle. In all a total of around USD 100m are in the market.
However it is the Indian digital currency which has potential. First is the basic construct. The Indian digital rupee is a crypto work. It does not have a central controlling server. Like bitcoin it works on a distributed architecture. The Chinese one on the other hand is completely govt controlled. It is a centralised system. One doesn’t need a bank account in China to transact on the digital yuan. In India nothing is clear as yet.
The Indian one has a far better foundational construct. All it needs is a secure element to come to life. And those chips are almost ready. Once u have two smartphones with the secure chips – u can transfer the digital rupee from anywhere to anywhere. This means that the Indian rupee has far greater chance of success for cross border payments. But then does RBi want to allow big ticket cross border payments
Fact is that if they won’t, someone else will.. and that will be the end of digital rupee as a US dollar challenger. It can compete here and there with its Chinese counterpart but that is hardly competition.
A good market to see who wins is London. It is a fairly liberal market. And a rather progressive one. It is a great place to access Africa from. During ID I had the opportunity of a brief conversation with my school friend Rajaram Venkatraman. He spent some years heading Citibank operations in Africa. The other expert I tried to glean wisdom from is Abhay Agarwal who runs a low ticket remittance service for money coming from USA to India. He played a key role in setting up Amazon pay in the U.S.
Now Amazon is a very ambitious company. It wanted to build a rival to NPCI. It is the kind of company you want to keep out of India. Amazon couldn’t enter China the way they wanted to. In India, the Ambanis put them in their place.
The reason I bring up Amazon is because these are players who can work to destroy your digital currency because they want to do it themselves.
The key to success of the indian digital rupee is not who you align with but who you stay away from.
NPCI is keen to align with players like Amazon. This will be the cause of their downfall. And not having an entity independent of NPCI to run the indian digital rupee can be the cause of its failure.
If the indian digital rupee has to win, it needs a new player to complement NPCI. Else success will be the cause of NPCIs decline and eventual failure will come from a cyber attack they could not prevent.