India’s digital currency push targets its leaky welfare system

India’s central bank digital currency pilot aims to plug billions in welfare leakages, potentially making it the world’s largest CBDC issuer. | Contesto: cronaca

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• India’s digital currency push targets its leaky welfare system

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India is quietly pushing its central bank digital currency into the country’s leaky welfare system, a move that, if successful, could transform the world’s most populous nation into the biggest issuer of a government-backed digital currency. The pilot program, still in its early stages, targets the direct transfer of subsidies and benefits through a digital rupee, aiming to reduce the rampant fraud and inefficiency that have long plagued India’s vast social safety net. The initiative comes as New Delhi grapples with persistent leakage in welfare programs that cost the treasury billions of dollars annually. By embedding the digital rupee into the payment infrastructure for schemes such as food subsidies, fertilizer support, and cash transfers, authorities hope to create an auditable, real-time trail that cuts out intermediaries and ghost beneficiaries. Early results from limited trials suggest the technology can sharply reduce diversion, though scaling it to cover hundreds of millions of recipients remains a formidable challenge. India’s central bank, the Reserve Bank of India, launched the digital rupee pilot for wholesale and retail segments in late 2022, but the welfare application represents a more ambitious use case. If the program gains traction, India could in theory become the largest issuer of a central bank digital currency globally, surpassing even China’s digital yuan in terms of potential transaction volume and user base. The country’s existing digital infrastructure, including the Aadhaar biometric ID system and the Unified Payments Interface, provides a ready-made backbone for the digital rupee’s integration into welfare payments. However, the path forward is fraught with obstacles. The digital rupee must compete with a well-established, low-cost instant payment system that already handles billions of transactions each month. Many beneficiaries lack reliable internet access or smartphones, raising concerns about exclusion. Privacy advocates have also warned that a government-issued digital currency linked to welfare distribution could enable unprecedented surveillance of citizens’ spending habits, especially given India’s history of expanding...

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Categoria: cronaca