The central bank has asked lenders not to report low-value transactions made via the digital rupee, seeking to ensure its proposed virtual currency offers a similar degree of anonymity associated with paper money for business exchanges below a material value threshold.
Bankers told ET that once the CBDC-R (Central Bank Backed Digital Currency-Retail) is transferred to customer wallets, banks will not track or report these transactions.
“These transactions don’t leave a trace in the core banking system and that’s why they are more anonymous than the current digital transactions,” said a senior official at a bank involved in the Reserve Bank of India (RBI) pilot project. Hence, the RBI has asked banks “not to report these wallet transactions as part of mandatory regulatory reporting”.
At present, most cash transactions in excess of Rs 50,000, such as bank deposits or purchases, require customers to disclose their permanent account number (PAN). While the RBI has not set a limit for CBDC-R, it is believed that retail transactions up to Rs 50,000 will not be reported. At the same time, transactions in excess of Rs 2 lakh will have to be reported for tax purposes.
“The CBDC-R gives far greater anonymity because the transactions are not hitting your bank account. Once you move the money to the wallet, they will not be reported,” said another banker.
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The RBI will know the aggregate CBDC-R in circulation, but it will not know exactly who owns how much of the virtual money, sources said.
Bankers explained that when a customer purchases CBDC-R from the bank, the next transaction that she makes will not hit her bank account, unlike in UPI where the bank has a granular view of the transactions. The digital wallet will have a record of these transactions to enable the complaint mechanism to kick in if transactions fail. Separately, multiple bankers told ET that CBDC-R would be traceable.
CBDC to be Traceable
“While the transactions will be anonymous, CBDC-R will always be traceable,” said a banker. “Limited traceability and record keeping are important but how limited and how long it will be is all under formulation by the RBI. The central bank is working on the anonymity idea but it will take a very long time because it has to reconcile this with the anti-money laundering and other requirements.”
On December 1, select users will get a CBDC wallet with digitally printed notes and signatures by the RBI Governor.
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