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E-Rupee: A Crypto Enabler or A Crypto Killer? | CoinGabbar Blogs

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07-Nov-2022 Anirudh Trivedi
E-Rupee: A Crypto Enabler or A Crypto Killer? | CoinGabbar Blogs

Just a few years back, when India was busy implementing 

its internet pipeline, nobody would have ever thought that it would set an example with the world's highest number of internet users. India is one of the largest economies in the world and has started testing out centralized bank digital currency, the e-Rupee, to embrace blockchain technology in its complex financial structure. 

Aspirations are high and Indians are willing to adopt CBDC as soon as they hit the retail markets after the trials. However, there are speculations that the Indian CBDC program can discourage crypto investors and force them to move towards centrally controlled blockchain currency. On the contrary, we can also hear voices supporting CBDCs as they can become the foundational stone of crypto investments in India. 

In this blog by CoinGabbar, we are going to explore both the above-mentioned perspectives and share with you a complete picture of the present blockchain scenario of the world’s most diverse country. Stay with us till the end to know what the future holds for the Indian cryptocurrency space.

What is E-Rupee?

E-Rupee is the digital form of Indian currency which is based on a blockchain network. It is a Central Bank Digital Currency (CBDC) that has been introduced to integrate blockchain technology into the Indian financial structure. Central Bank Digital Currency or CBDCs are the cryptographic tokens minted on-chain by a central regulatory authority (Reserve Bank of India, in this case) with a pegged value of that of the fiat currency of that nation. 

The concept of the e-Rupee came into existence in January 2017 and five years later, i.e. from 1st November 2022, India is testing out its CBDC in the wholesale market for secondary trade in government securities. The results from this testing will basically enable the authorities to spot operational loopholes and get the blockchain ready for the final run. 

Why will People Prefer to Use E-Rupee?

E-Rupee is going to hit the markets once the testing is successfully completed. Indian crypto enthusiasts are waiting for testing out the CBDCs and know whether they can be integrated into the complex finance system of the nation. Here are some of the reasons that will impel the masses to adopt the e-Rupee and increase its usability in the retail market. 

Backed By the Government of India

Most of the crypto transactions in India happen to facilitate International services payment to cut down the hassle of exchange rates. The problem with paying in cryptocurrencies is that they are not backed by any official authority, making them highly volatile by nature. However, CBDCs are backed by the Reserve Bank of India and their value is directly pegged to the value of the Indian Rupee (INR). This can flourish the required level of trust amidst uncertain market conditions. 

Better Alternative to Stablecoins

Stablecoins are those cryptocurrencies that are pegged to the value of a country’s currency. But this feature of stablecoins does not equate them with CBDCs. Stablecoins run on a private blockchain network, unlike CBDCs. CBDCs are run on a blockchain network that is within the control of a legal centralized authority of the nation to which it is pegged. 

CBDCs also have an upper hand over stablecoins as they are the legal tender in one of the largest economies of the world. Being the legal tender in an economy means that none can refuse the payments in CBDCs and that can make it a popular mode of micropayments.

Transparency in Transactions

One of the best things about blockchain networks is that all the transactions are open and can be verified by anyone on the chain. Transparency in transactions is the key when it comes to monitoring the flow of money. CBDCs have the potential to make it easier for the government to trace down transactional data on-chain. Blockchain makes the data immutable ensuring zero modifications in the transactional information. 

Faster Transactions and User-Friendly

Blockchain transactions are superfast, precise, and irreversible. This makes it a viable alternative to fiat money in open markets and can open the gates for massive blockchain adoption. Crypto transfers are swift, reducing the straggling nature of third-party payment methods. All blockchain transactions are settled with smart contracts and do not need any settlements from banks. This reduces the cost and increases the efficiency of financial transactions.

Why CBDCs WILL NOT Replace Cryptocurrency?

The government is bringing CBDCs into the nation with an aim to provide a variable alternative of fiat and private blockchain network to the citizens. However, the government does not seem to have any intention of replacing CBDCs with cryptocurrencies. 

Cryptos are inherently different from centrally controlled CBDCs, making them a completely different means of transaction for people with different needs. Here are some of the reasons why CBDCs will not replace cryptocurrencies in the times to come.

Cryptos are Great for Investments

Bitcoin has given a max of 308% returns in 2020 only. This might sound way too much for market investors where the traditional investment opportunities rarely give anything above 30% of returns. There have been many cases in cryptocurrencies in which early investors made millions of dollars which changed their fate. 

Cryptocurrencies are new and highly volatile in nature, a single crypto bull run has the potential to change the fate of the investors. This nature makes them perfect for taking risks in investments and earning substantial profits. 

However, the price of the e-Rupee is going to be of the same value as that of the Indian fiat currency. CBDCs are not investments and that is why they can never take the place of cryptocurrencies.

Cryptocurrencies are Universal

Indian CBDCs are legal tender and that makes them acceptable all around the country. On the other hand, cryptocurrencies such as Bitcoin and Ethereum have widely accepted modes of payment all over the globe. 

Cryptocurrencies have become the common mode of payment for citizens from different currencies without the need to go to an exchange. Indian CBDCs might not be able to replace the authority of cryptocurrencies as a universal mode of payment.

Mining is Not Possible For CBDCs

Cryptocurrencies gained their initial popularity in India neither as an investment nor a payment method. Crypto became prevalent in India when people started mining Bitcoins and Ethereum to earn some extra bucks. Things changed after Bitcoin had its first bull rally and that introduced more people to the crypto ecosystem. To know what is mining in detail read what is mining.

Mining cryptocurrencies has been a profitable business for many in India and we have seen massive mining rigs from individual miners. On the other hand, CBDCs cannot be mined and thus cannot replace cryptocurrencies when it comes to mining rewards.

Cryptos are Utility Tokens As Well

Indian CBDCs are going to be used for making value transactions and cannot be used to serve any different purpose than making payments of their true value. However, crypto tokens are way beyond their value and can act as utility tokens for different DeFi ecosystems. Decentralized Autonomous Organizations (DAO) give their token holders the right to be a part of the decision-making processes and other operations. 

Ethereum mainnet is not only about its ETH token but also the world’s largest ecosystem for decentralized applications. Non-Fungible tokens (NFTs) are also on different crypto blockchains. This is one of the primary reasons that distinguishes cryptocurrencies from CBDCs and makes them irreplaceable.

CBDC: A Better Alternative to Transactional Cryptocurrencies

CBDC is a government-backed digital currency which ensures that you can hold your tokens in your wallet without the need to worry about their market prices. They are a much safer form of paper money secured by immutable blockchain records. Cryptocurrencies cannot be physically stolen, have clear ownership, and have an immutable transactional record. This gives it a clear upper hand over fiat currency. 

However, CBDCs are better than other private transactional blockchain networks as they can be trusted without even thinking twice. On the other hand, we have witnessed private stablecoins being collapsed to nothing without having any clear answerability to their users. The Indian government is directly answerable to all e-Rupee transactions and it could be one of the reasons for its mass adoption.

A Challenge to the Dominance of the Dollar

All International financial institutions such as the World Bank, World Economic Forum, WTO, IMF, and others, are designed to promote and propagate the American dollar into other economies. This has created a dollar hegemony in International trade and a majority of the countries trade primarily in dollars. 

This dominance of the dollar is already under threat as Bitcoin emerges to become a universal currency without the associated threads that come with the dollar. However, the volatility of the blockchain market and constant price fluctuations in Bitcoin prices is the reason behind its unreliability. 

These are the ideal scenarios when India can push its e-Rupee in its regional financial operations and insists on paying in e-Rupee instead of dollars. Regional financial institutions such as Asian Development Bank, BRICS, South Asian Development Fund, and others have a dire need for a currency that is cheaper to operate and does not come with too many tariffs. 

India could leverage CBDCs’ potential to challenge the hegemony of the dollar in its own International trading operations.


CBDCs are soon going to enter the Indian financial ecosystem with full force. This step from the government will push the users to understand how blockchain technology works and how they can transact without any mediator. A level of understanding of decentralization and blockchain assets will increase overall participation in the blockchain and crypto space. 

CBDCs will not kill the scopes of cryptocurrencies as they have different use cases in different scenarios. However, they can surely act as a crypto enabler in India by providing the common Indian citizen with basic knowledge of blockchain operations. Cryptos will no longer be a distant sun for Indians and India could witness a huge blockchain revolution if the entire CBDC project is implemented to its full potential. 

We at CoinGabbar daily cover interesting crypto topics to educate our readers. If you want to read more such interesting topics, visit CoinGabbar and get hundreds of insightful blogs for FREE. 

What according to you would be the impact of the e-Rupee on the crypto adoption in India? Share your comments below!

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