Digital Finance | Economy | FinTech | Digital Currency • 31 OCTOBER 2026

The rise, the setbacks and the economics of central-bank digital currencies — and why India may be discovering their most useful purpose.

A customer waves a phone over a QR code. The shopkeeper receives the money immediately. Neither sees notes, coins or a bank teller. So what exactly has changed if a central bank replaces the banking system’s digital balance with a digital version of cash? The screen may look identical. The legal claim behind the screen is not.

That distinction sits at the center of the global experiment with central-bank digital currencies, or CBDCs. After a decade of prototypes and half a dozen headline launches, the verdict is less glamorous than the technology: making sovereign money digital is possible. Making it useful enough that people choose it voluntarily is much harder. Across 93 central banks surveyed in 2024, 85 were exploring a CBDC. Yet the Atlantic Council counted only three national retail launches by May 2026: the Bahamas, Nigeria and Jamaica. China and India were running large pilots, not declaring the project finished.^{[1] [2]}

1 The concept: digital money is not necessarily digital cash

A CBDC is money issued as a direct liability of a central bank in digital form. A retail CBDC is designed for people and businesses; a wholesale CBDC is intended for banks and other authorized financial institutions settling larger transactions. It is not Bitcoin, whose price floats, nor a typical privately issued stablecoin, whose value depends on an issuer and its reserve arrangements. CBDCs need not run on blockchain. They can use conventional databases, distributed ledgers or hybrid architectures.^{[16] [3]}

FIGURE 1 Four familiar ways to pay, four different legal claims. Simplified; particular wallet structures vary by jurisdiction.

A bank transfer using UPI, connectIPS or another instant-payment rail generally moves commercial-bank deposits, not a new form of central-bank cash. That may deliver nearly all the convenience of a retail CBDC at very low cost. A CBDC’s distinctive proposition must therefore be more specific: public access to sovereign digital money, an offline fallback, more resilient settlement, financial inclusion, or functionality that ordinary rails cannot deliver affordably.

2 A history written in pilots, launches and reversals

Central banks have been experimenting with electronic value for decades, but the modern CBDC wave followed China’s research from 2014, Ecuador’s central-bank mobile-money service, and a surge of interest after the growth of cryptocurrencies and private digital money. Several very early experiments are loosely labelled CBDCs retrospectively; they should not be confused with today’s retail legal-tender models.^{[3] [4]}

FIGURE 2 Milestones are selected turning points, not a list of all pilots. A commercial launch is different from a controlled pilot.

What each first mover actually taught the world

Jurisdiction / date	What happened	Evaluation and lesson
Ecuador • 2014–18	Central-bank mobile e-money ran and was closed in 2018.	Lack of trust, weak uptake and resistance from banking interests showed that institutional credibility is as important as the technology.
Uruguay • 2017–18	A six-month e-peso pilot ran on mobile phones, including without internet.	Technically positive pilot ended by design. Not deploying after a test is not evidence of technical failure.
Bahamas • Oct 2020	Sand Dollar launched nationally with inclusion as a priority.	By end-2024, only ~0.4% of currency in circulation: legal availability did not solve merchant acceptance and habitual use.
Nigeria • Oct 2021	eNaira launched; expanded to USSD / wider access.	Early wallet downloads outpaced actual payments. The missing ingredient was an everyday benefit better than existing options.
Eastern Caribbean • 2021	DCash currency-union pilot suffered a two-month outage in 2022; DCash 2.0 development was suspended in 2026.	Certificate-management failure underscored operational resilience; authorities pivoted toward faster-payment infrastructure.
Jamaica • July 2022	JAM-DEX introduced; merchant coverage grew slowly.	Adoption remained limited, although 2026 transaction flows improved. Reaching users is different from creating active commerce.
China • pilot from 2020	e-CNY trial scaled; new deposit-style arrangements began in January 2026.	Large-scale testing demonstrated capability, but interest, bank incentives and integration still required redesign.
Sweden / Euro area	e-krona technical pilot concluded in 2023; EU selected 36 PSPs for 2027 digital-euro pilot.	Advanced economies are cautious: legal design, privacy, incentives and bank stability are as important as coding.

Sources: IMF assessments of Ecuador, Uruguay, Bahamas and Nigeria; Bank of Jamaica reporting; ECCB Monetary Council communiqué; Swedish Riksbank, Chinese authorities and the ECB. The word “failure” should be used carefully: Ecuador shut down; DCash stumbled and changed course; Uruguay completed a planned test; Nigeria and Jamaica are still seeking stronger usage.^{[4] [5] [6] [7] [8]
[9] [10] [11] [12] [13] [14]}

Three recurring mistakes

First, counting downloaded wallets as adoption: a person who signs up but never pays a merchant adds little network value. Second, assuming free transfers are enough: merchants need acceptance tools, easy reconciliation, refunds and support. Third, underestimating confidence: an e-wallet that fails during a crisis, or raises fears of surveillance, can lose the very advantage public money is supposed to provide.

The Bahamas illustrates the network problem. IMF reporting places the Sand Dollar at roughly 0.4% of currency in circulation at end-2024 even as consumer wallets passed 133,000. Nigeria illustrates the activity problem: IMF data found about 942,000 eNaira retail-wallet downloads by November 2022 but fewer cumulative transactions than downloads. And the Eastern Caribbean illustrates the reliability problem: a 2022 certificate-management malfunction stopped DCash payments for weeks, before the Monetary Council suspended development of DCash 2.0 in 2026 in favour of faster payments and regional settlement priorities.^{[7] [8] [11]}

There are constructive counterexamples. China disclosed 3.48 billion cumulative e-CNY transactions worth 16.7 trillion yuan by November 2025, then moved bank-held digital-yuan wallets toward interest-bearing deposit treatment from January 2026. That is a profound design shift: rather than insisting all digital yuan must behave exactly like paper cash, policymakers adapted it to banking incentives. Meanwhile the ECB’s work remains explicitly conditional on legislation and a later issuance decision, with 36 payment providers chosen for a 2027 pilot.^{[13] [14]}

3 India: the world’s most revealing live laboratory

India had the unusual advantage of already possessing an extraordinary digital public infrastructure. Its Unified Payments Interface (UPI) allows bank-account payments at enormous scale; government figures put UPI at 81% of retail digital-payment transaction volume in FY2024–25. If India could already move bank deposits quickly through a widely accepted QR code, what extra job should the digital rupee perform?^[21]

The Reserve Bank of India answered carefully, not with a big-bang launch. It released its concept note in October 2022, began a wholesale pilot for government-securities settlement on 1 November and a retail pilot on 1 December 2022. Retail tokens were distributed through banks and were intended to resemble cash: legal tender, no interest and conversion into bank deposits. RBI later made retail e-rupee wallets compatible with existing UPI QR acceptance, reducing the merchant-side burden of a second payment network.^{[16] [17]}

Pilot / experiment	What has been tested	What we can responsibly conclude
Retail: person-to-person / merchant	Bank-issued e-rupee wallets, cash-like transfers and UPI QR interoperability.	Technically feasible and easier to accept where QR already exists; everyday preference over UPI is not established.
Programmable government support	Purpose-bound subsidies, including food distribution pilots in Gujarat, Puducherry and Chandigarh in 2026.	A practical differentiation from unrestricted account transfers; must protect choice, privacy and dignity.
Offline payments	Transactions without continuous internet connectivity under testing.	Potentially vital for rural access and outages; double spending, device loss and limits remain design challenges.
Wholesale securities / call money	Settlement of government-securities and interbank money-market transactions.	Could reduce reconciliation or settlement frictions; actual system-wide savings remain to be proven.
Tokenised assets	Certificates-of-deposit tokenisation pilot linked to a wholesale settlement interface.	Interesting for delivery-versus-payment and atomic settlement; still exploratory.
Cross-border	Talks with Singapore and the UAE plus BIS-related collaboration.	Promising, but governance, capital controls, AML rules and FX liquidity are harder than wiring two ledgers together.

The most interesting development came from the welfare system. On 26 February 2026, Puducherry launched a food-subsidy pilot in which beneficiaries received programmable e-rupee tokens redeemable for eligible foodgrains at authorised shops. Similar tests started in Gujarat and were extended to other territories. Such “purpose-bound” money can potentially reduce diversion. But the promise creates an equally important safeguard question: who sets the conditions, how are mistaken exclusions corrected, and can ordinary citizens still hold unrestricted money?^{[18] [19]}

The evidence: more participants, but no retail adoption victory yet

Government information reported 8.2 million retail-pilot users and 1.1 million merchants as of November 2025. These figures indicate impressive reach; they do not measure active repeat purchases. At the same time, the RBI’s 2025–26 annual-report figures showed e-rupee retail currency outstanding falling from INR 1,016.46 crore at March 2025 to INR 771.66 crore at March 2026 — a decline of about 24%. That is not proof the experiment failed, but it is evidence that distribution alone is not demand. Wholesale CBDC closing balances can be zero while transactions occur, because positions may be redeemed at day-end.^{[18] [20]}

FIGURE 3 Retail e-rupee outstanding (not total transactions or active users), FY end. Source: RBI Annual Report 2025–26 figures reported by Reuters.

India’s achievement is therefore methodological. It has tested retail convenience, UPI interoperability, welfare programmability, offline resilience and wholesale settlement separately. That makes a future go/no-go decision more credible. The hardest question is whether the digital rupee will eventually prove superior in a few distinct public-interest uses rather than attempt to replace an extremely successful payment system already in place.

“India’s real question is not whether digital cash can work. It is what digital cash can do that UPI cannot.”

4 Capitalism invented the convenience. The bill came later.

Private banking and payment networks have produced real economic value. Cards made remote shopping, travel, fraud protections and unsecured consumer credit practical at scale. Wallets simplified authentication and merchant acceptance. Fintech firms competed on user experience. This innovation was not a mistake — but it did build a complex commercial toll system around the simple act of transferring purchasing power.

For a merchant, a card sale can generate interchange, network and acquiring costs. Issuers may use fee income to support rewards, credit underwriting, fraud management and customer service. Those activities create value, yet their costs do not vanish. If a shop absorbs card acceptance costs in its shelf prices, customers paying cash or low-cost debit can share the bill. US Federal Reserve researchers have documented this cross-subsidy and found that payment-card reward patterns can favour higher-income households. That is a distributional effect, not a direct estimate of economy-wide inflation.^{[24] [25]}

FIGURE 4 Where costs arise. Conceptual flows only; no claim that any method is literally free or cheaper in every setting.

There is a critical distinction between a higher retail price level and inflation. Card processing costs may raise some prices or redistribute costs among shoppers, but sustained general inflation depends on wider monetary, supply and demand conditions. Credit cards can also amplify demand through borrowing; this, too, is context-dependent, not a simple one-way cause of inflation. Cash is not free either: printing, transporting, handling and guarding notes all cost money, even where no consumer sees a checkout fee.

Australia did not abolish credit cards — it attacked the surcharge

Australia offers a more precise example than the claim that it is trying to abandon credit cards. From 1 October 2026, surcharges generally ceased on eftpos, Mastercard and Visa transactions as card networks adopted no-surcharge rules; the RBA simultaneously lowered interchange-fee caps. Its aim was to simplify checkout pricing and reduce the underlying merchant-cost burden. Credit cards still exist. And in September 2026, Australia’s central bank reiterated that it did not see a clear present public-interest case for a retail CBDC, even while continuing wholesale digital-money experiments through Project Acacia.^{[22] [23] [15]}

That is an important lesson for CBDC advocates. A government can lower payment tolls by regulating network economics, promoting competition and operating modern instant-payment rails — without issuing a new currency instrument. Conversely, a retail CBDC can be designed with low fees but still create real technology, security, customer service and compliance expenses. It is neither costless by definition nor automatically the lowest-cost solution.

5 The public option: compelling in theory, conditional in practice

The strongest argument for CBDC is not that private companies are bad. It is that a society needs a public monetary anchor even as shopping, wages and services migrate into privately operated digital systems. Banknotes provide this option at the physical counter. Well-designed CBDC could provide a digital counterpart — public money distributed through competing private providers rather than a monopoly government wallet.

Potential public value	A hard design trade-off
Basic low-cost payments and fairer merchant economics	Merchants still need terminals, support, fraud controls and reconciliation; costs must be funded.
Offline resilience and inclusion	Offline devices introduce limits, counterfeit/double-spend controls and device-loss risks.
Direct, final central-bank settlement	Retail deposits could migrate from banks during stress unless holdings are capped or banks are protected.
Cross-border speed and lower correspondent fees	FX rules, capital restrictions, AML/CFT compliance and legal jurisdiction remain.
Programmable public transfers	Risk of restrictive spending controls, discrimination, intrusive monitoring and mistaken denials.
A public alternative to dominant private rails	Technology concentration, cybersecurity and operational outages can simply move into the public layer.

And there is a democratic question: how private should a payment be? Physical cash permits everyday exchanges without a central transaction log. A digital public instrument cannot claim to replicate this without strong technical, legal and institutional safeguards. The ability to investigate criminal activity need not imply routine state surveillance of harmless purchases. CBDC legislation must specify data minimisation, independent oversight, lawful disclosure standards, cash coexistence and remedies for errors.

Wholesale CBDC may reach practical value before retail CBDC. BIS Project mBridge tested cross-border settlement on shared infrastructure and reached a minimum viable product stage in 2024 before its handover to participating institutions. Australia’s Acacia research also found that asset tokenisation can bring gains, though many may be achieved using existing central-bank settlement accounts. The right question is whether new digital central-bank money improves an existing process enough to justify its new risks.^{[27] [15]}

6 What Nepal can learn before writing a digital rupee

Nepal is not a blank slate. NRB published a CBDC consultation in 2022 and later reported a dedicated CBDC division, a wholesale prototype and an ambition to begin a pilot around 2026. It was also an observer of BIS mBridge. The country already has QR payments, bank apps, wallets and interbank infrastructure; those achievements should be treated as assets, not as systems that a CBDC must displace.^{[28] [29] [27]}

A prudent Nepal experiment would start with measurable problems: domestic wholesale settlement, government transfers where clear public benefits exist, offline access for remote communities, or lower-cost settlement of remittances. Each should have a control group against the best available non-CBDC alternative. Publish cost per transaction, actual repeated use, merchant acceptance, incident rates, privacy impacts and recovery performance. Expand only when the evidence — not the novelty — justifies it.

7 The answer is neither a rush nor a rejection

The early CBDC pioneers proved that public digital currency can be issued. Their mixed results proved something more useful: a nation cannot legislate a reason for people to use it. India’s live pilots demonstrate why the strongest potential may lie in targeted public services and wholesale settlement rather than in replacing every QR payment. Australia shows that payment-cost reform can progress without a retail CBDC. Sweden and Europe show that waiting for the legal and social case can be a form of competence, not indecision.

The attractive destination is a layered system: sovereign money as a trusted foundation; regulated banks and fintech firms competing to make it useful; transparent prices; credible privacy rules; instant and resilient transfers; and genuine customer choice. A CBDC could be one valuable component. The ultimate solution is not the acronym. It is a payment system that is cheap, safe, competitive, inclusive — and trusted enough to be used.

The bottom line — six conclusions

• CBDC means a new form of central-bank money, not simply another phone app or faster transfer.

• Launch is not adoption: the Bahamas, Nigeria and Jamaica illustrate the difference.

• Failures are useful evidence: Ecuador ended its system; DCash changed course; Uruguay completed a planned experiment.

• India is testing differentiated uses, although retail e-rupee balances fell during FY2025–26.

• Credit-card merchant charges can create cross-subsidies, but they are not the same as measured inflation.

• Public digital cash is a plausible part of the future — not a substitute for market competition, privacy rights or good regulation.

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Who Should Own Digital Cash?

The rise, the setbacks and the economics of central-bank digital currencies — and why India may be discovering their most useful purpose.

1 The concept: digital money is not necessarily digital cash

2 A history written in pilots, launches and reversals

3 India: the world’s most revealing live laboratory

4 Capitalism invented the convenience. The bill came later.

5 The public option: compelling in theory, conditional in practice

6 What Nepal can learn before writing a digital rupee

7 The answer is neither a rush nor a rejection

Further reading and source notes

Global landscape and taxonomy

Launches, experiments and setbacks

India: policy, experiments and numbers

Private payments, fees and public alternatives

Wholesale innovation and Nepal

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