India to make its digital currency programmable
- Reference: 1707455707
- News link: https://www.theregister.co.uk/2024/02/09/india_programmable_money/
- Source link:
The country's current CBDC retail pilot launched in [1]late 2022 . It already enables both person-to-person and person-to-merchant transactions. Apparently, that's going well enough for RBI to add more functions.
"It is now proposed to enable additional functionalities of programmability and offline capability in CBDC retail payments," stated RBI in its latest [2]monthly governor's statement . "Programmability will facilitate transactions for specific/targeted purposes, while offline functionality will enable these transactions in areas with poor or limited internet connectivity."
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India has plenty of those – both in remote locations and in its mountainous regions where it's hard to create pervasive mobile networks.
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The new functions are to be introduced gradually through more pilot programs.
Indian media [6]report that governor Shaktikanta Das outlined scenarios for the programmable digital rupee, including allowing government agencies to ensure payments to citizens are only used for defined benefits. Businesses, he added, could "program specified expenditures like business travel for their employees." Das even envisaged digital cash being tied to geographical areas.
[7]Programmable or 'purpose-bound' money is coming, probably as a feature in central bank digital currencies
[8]Florida man slams 'tyranny' of central bank digital currencies in re-election bid
[9]Use AI to accelerate adoption of central bank digital currencies, says IMF head
[10]Britcoin or Britcon? Bank of England grilled on Digital Pound privacy concerns
RBI's e-rupee plans extend beyond making programmable and offline CBDCs. It plans to put in place a principle-based framework for authentication of digital payment transactions. It has already tested additional factor authentication – including SMS-based OTP – but would like some more options.
In the governor's message, RBI chief general manager Yogesh Dayal framed these initiatives as an economic development accelerator.
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"At the current juncture, India's potential growth is propelled by structural drivers like improving physical infrastructure; development of world class digital and payments technology; ease of doing business; enhanced labour force participation; and improved quality of fiscal spending," asserted Dayal.
Another way India is looking to build its digital economy is by allowing itself to tax more of it. Bloomberg [12]reported the nation will call for the end of a 1998 agreement not to tax digital goods. If India succeeds, tariffs could be allowed on a wide range of items – from software downloads to video games.
India has argued that the current international agreements cause loss of tariff revenue and affect its trade competitiveness. ®
Get our [13]Tech Resources
[1] https://www.theregister.com/2022/11/30/indias_retail_cbdc_pilot_starts/
[2] https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=57277
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/cybercrime&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZcYF2Ssy6rWQvqHIi9qDrQAAAYQ&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/cybercrime&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZcYF2Ssy6rWQvqHIi9qDrQAAAYQ&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/cybercrime&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZcYF2Ssy6rWQvqHIi9qDrQAAAYQ&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://economictimes.indiatimes.com/wealth/save/cbdc-big-update-soon-use-rbis-digital-rupee-for-offline-transactions/articleshow/107513345.cms?from=mdr
[7] https://www.theregister.com/2023/12/21/programmable_money/
[8] https://www.theregister.com/2024/01/22/trump_cbdc_comments/
[9] https://www.theregister.com/2023/11/16/imf_head_ai_cbdc_call/
[10] https://www.theregister.com/2023/09/18/digital_pound_treasury_committee/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/cybercrime&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZcYF2Ssy6rWQvqHIi9qDrQAAAYQ&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[12] https://www.bloomberg.com/news/articles/2024-02-08/india-to-push-wto-to-lift-a-moratorium-on-electronic-trade
[13] https://whitepapers.theregister.com/
Re: A tyrant's dream
Does the programmability allow them to make the money expire after a certain date? Forcing everyone to spend rather than save.
Re: A tyrant's dream
It's not mentioned in that release but the RBI did mention it in a 2022 concept note:
https://rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage&ID=1218
It can also have other implications for monetary policy transmission as tokens may have an expiry date, by which they would need to be spent, thus ensuring consumption.
How to launch a black market, step 1:
allowing government agencies to ensure payments to citizens are only used for defined benefits
I think, with universal adoption (a long way off, even in the most controlling countries) it would become hard to run a black market because, at any sort of scale, they're still run on fiat cash. I acknowledge that people could barter but that would rely on a black market producer or high levels of sustainable theft. This may be a black swan theory but it seems fairly trivial with a CBDC for a government to identify people exchanging their limited tokens for non-limited ones. Perhaps someone else will issue their own currency but that seems like a lot of trust to place in your black market merchant.
Perhaps CBDCs will never fully supplant cash but, if they did, I can see it making black markets (outside of local barter) extremely difficult.
Can hardly wait
Until someone manages to turn Indian digital currency into a botnet mining some other cryptocurrency. Every digital currency transaction in a country of a billion pays you a few cents worth of mining. You'll be like Richard Pryor in Superman III!
Maybe try walking before running?
I mean, Aadhaar leaks like a sieve and the Unified Payments Interface is used for [1]money laundering ...
[1] https://www.theregister.com/2023/10/24/scammers_use_indias_realtime_payment/
The scary bit is not that CBDC can be programmed or earmarked to be used for a specific purpose. That will only hamper its adoption. The scary bit is, that even when the CBDC was not created with that programmability, it can easily be bolted-on later.
This is something to keep in mind when you read the EU draft regulation; "The CBDC “shall not be programmable,” the text added, following concerns that giving the ability to control how given funds are used could limit the freely usable nature of fiat currency. Basically, it means for the time being, the CBDC will not be programmable.
Programmable vs Offline-exchangeable
Offline-exchangeable - thumbs-up, very good feature
Programmable - big thumbs-down. In the worst-case scenario it's full Black Mirror, the government can disable anyone's money at a whim. But even at the most benign interpretation, which is for example that the government can only do this to a limited number of issued tokens, which are limited to buying basic foodstuffs but not luxuries.... the intent is that patronising idea that poor people receiving government handouts are stupid and/or lazy and can't be trusted with cash handouts in case they might occasionally buy (shock, horror) a pack of cigarettes or a bottle of wine. This type of restriction anyway won't work, if someone really wants to buy other stuff than designated they can always barter designated stuff for non-designated stuff (clearly at a loss and to the benefit of criminal sharks willing to facilitate that trade). In fact the only method of making sure government handouts are not squandered that has reliably been proven to work is to give control (or at least joint control) of family finances to the mother rather than the father.
In any case even the lightest entry into programmability is a slippery slope to ever more restrictions on how the e-cash can work
A tyrant's dream
Programmable, traceable currency grants a level of control over people's lives that I don't think has ever been achieved across a whole nation in history. That's not to say bad things will definitely happen if it's adopted by a given nation, it just gives government the opportunity.
I expect, if the time comes, people will be told that normal currency is only really used by criminals and to please think of the children.