Why it matters – The Week

Cash is quietly retreating from center stage, and nations are racing to redesign the rules of money. In India, this shift is driven by the central bank’s willingness to integrate digital currency as part of official legal tender.

But policymakers today are grappling with who will set tomorrow’s standards for transactions, privacy and influence. This, even as more than 130 countries, which account for 98 percent of global GDP, are actively exploring central bank digital currencies (CBDC).

Leaders are asking how this wave will reshape economies, multiply connections and test the limits of sovereignty and inclusion.

The real force behind this transition is not technology, but the leadership calls and public trust that will determine the future role and reach of digital money.

Digital payments are critical infrastructure.

Global digital payments are expected to exceed $24 trillion in 2025, marking another year of explosive growth driven by both advanced and emerging economies. India continues its leadership in this area as the Unified Payments Interface (UPI) processed more than 20 billion transactions worth nearly Rs 24.9 lakh crore in September 2025 alone, with total monthly volumes reaching an all-time high.

UPI now accounts for as much as 85 percent of India’s digital transaction volume and nearly 50 percent of global real-time payments, cementing its place as critical financial infrastructure essential to national competitiveness and policy leverage.

India’s digital currency path

While much of the world is experimenting with crypto or stablecoins, India has taken an assured but cautious route to digital currency. The Reserve Bank’s pilot of the central bank digital currency (CBDC), known as the Digital Rupee, now has more than five million users and is supported by 16 major banks.

Take-up is gradual, partly due to UPI’s existing dominance and the public’s trust in bank-led digital payments. As of March 2025, digital rupee circulation has hit Rs 10.16 billion, up 334 percent in a year, but still modest compared to cash or UPI flows.

The lesson? Even innovation must match the realities of public trust, convenience and infrastructure readiness.

For India, the ultimate test will be whether digital money can co-exist with cash and UPI, reliably serve both urban and rural users and provide the security and simplicity that drives mass adoption. Policy makers must also anticipate and respond to potential obstacles around privacy, systemic risk and cross-border use.

Stablecoin, CBDC and the Inclusion Debate

CBDCs are a sovereign response to private innovation in global payments. Where stablecoins offer programmable, borderless value transfer, especially for cross-border trade, CBDCs bring regulatory assurance and monetary control.

In India, stablecoin use is not widespread and remains outside formal regulation, although the concept of rupee-backed stablecoins is gaining attention.

Their potential is to enable Indian startups and professionals to access global opportunities without depending on the dollar.

For Indian businesses, the digital rupee is likely to remain the official digital tender; Stablecoins may emerge as niche tools for cross-border trading or as fintech products, provided regulatory clarity develops.

Cash transfer via digital currency and UPI

The core context for accelerating cash transition now rests on the digital currency’s coexistence with UPI. As highlighted in the Worldline report, “UPI QRs more than doubled between January 2024 and June 2025, rising 111 percent from 321.38 million to 678 million — starting as distributed QR placement in the world’s largest merchant acceptance network.”

Biometric and PINless UPI pilots are also set to unlock frictionless adoption for elderly users and feature phone segments, marking the next frontier of inclusion.

For India, the critical challenge will be to ensure that digital money and UPI together serve both urban and rural users reliably – and provide the simplicity, security and mass adoption needed to advance beyond cash. The combined ubiquity of UPI and the assurance of the central bank-underwritten digital currency provides a pragmatic blueprint for widening digital inclusion and accelerating the national cash transition.

Where India stands today

The Digital Rupee is not just a technological experiment – it is a legally recognized tender issued and guaranteed by the Reserve Bank of India. Its pilot now includes over 50 lakh users and 16 major banks across retail and institutional pilots, including State Bank of India, HDFC Bank, ICICI Bank and Bank of Baroda. It is tested in everyday scenarios including merchant payments, government transactions, transportation systems and offline mode environments.

How Digital Rupee works

* Stored in a digital wallet issued by authorized banks

* Works offline or online, including QR-based small value payments

* Offers instant settlement without intermediary fees

* Designed like cash in digital form (no interest earned)

* Enables traceability for high-value transfers while protecting low-value privacy

Legal and operational modalities

The RBI controls issuance, wallet rules and custody of balances, ensuring that users enjoy the same legal protection as physical currency. Merchant onboarding follows existing UPI-like frameworks, enabling interoperability across apps, banks and acceptance points.

The successful future of this initiative is built on several strategic pillars: the finalization of robust data privacy measures and user consent mechanisms; providing upgraded offline capabilities for rural and low-connectivity zones; establishing clear modalities for cross-border and forex settlement; and to ensure seamless coexistence with UPI and India’s wider digital infrastructure.

While others debate the theoretical merits of CBDCs, India is gathering operational knowledge at scale. And the world is watching, not because of India’s CBDC experiments, but because of what it has already deployed at scale—UPI has not only digitized payments; it democratized them and gave a street vendor the same transactional infrastructure as a multinational corporation.

The question now is whether India can replicate that feat with digital currency.

The way forward is not mysterious. This requires building on proven strengths: interoperability, inclusion and infrastructure that works for everyone, not just smartphone users. This requires involvement in global standard-setting bodies while protecting sovereignty over monetary policy. And it needs the same quality that made UPI succeed: the belief that financial tools should serve people’s real needs rather than force people to adapt to the technology.

India has proven that smart investment in financial innovation opens doors that extend far beyond the banking sector. The leaders who anticipate what comes next and act with vision will set the conditions for prosperity in the digital age.

The author is Chief Delivery and Operations Officer (India) at Worldline, a global payments technology company

The opinions expressed in this article are those of the author and do not purport to reflect the opinions or views of THE WEEK.