The usage of India's digital currency, the e-rupee, has seen a significant decline, dropping to just one-tenth of its peak in December, according to sources familiar with the matter. This decline reflects challenges faced by several countries in garnering public support for digital currencies.

The Reserve Bank of India (RBI) launched a pilot for the e-rupee in December 2022, aiming to provide a digital alternative to physical cash. By December 2023, the pilot achieved its target of 1 million retail transactions per day, bolstered by incentives offered by banks to retail users and the disbursement of a portion of bank employees' salaries using the e-rupee.

However, sources directly involved in the pilot revealed that daily transaction numbers have now plummeted to around 100,000. "This shows there is little organic demand to use the e-rupee," commented one banker involved in the project, highlighting the stark contrast from the earlier surge.

The sources, who spoke on condition of anonymity due to confidentiality protocols, noted that the decline in transactions is partly mitigated by banks continuing to disburse benefits to their employees via the e-rupee. Towards the end of each month, transactions slightly rise to about 250,000 to 300,000.

Initially, the RBI aimed for transactions to reach at least 1 million per day by late 2023 to test the system's scalability. However, the push to increase transactions has ceased, indicating a shift in focus. "The RBI is currently focused on testing the technology and developing use cases for the digital currency," one source mentioned.

"Adoption should grow as more use cases develop," the source added optimistically, pointing to ongoing efforts to enhance the e-rupee's utility.

Globally, central banks are exploring digital currencies, with a third of them conducting pilots for central bank digital currencies (CBDCs). However, actual deployments, such as those in the Caribbean by the Bahamas and Jamaica, have encountered limited success, as noted by the Federal Reserve Bank of Kansas City.

"We have observed that to spur adoption, consumers may need more than just retail CBDC technology. They may need the retail CBDC to offer additional value compared to cash," the Kansas City Federal Reserve highlighted in an April note.

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