Just outside the Reserve Bank of India's Monetary Museum, which charts the evolution of money, from barter to electronic transactions, Bachche Lal Sahani, 45, is testing the nation's newest form of currency, the e-rupee.
The fruit vendor is among the first retailers in India to use the central bank digital currency (CBDC), the RBI, launched as a pilot on Dec 1, a month after the trial for wholesale, or interbank transactions, was rolled out.
Since then, Sahani has recorded only about 30 purchases with the e-rupee, which is one of several digital payment options he offers besides Google Pay and PayTM.
But he is hopeful it will catch on with customers, many of whom prefer cash. "People don't know about e-rupee yet because it is still in its pilot phase. It will become popular, but it will take time," Sahani said.
A CBDC is the digital form of a country's fiat, or official, currency that can be used for interbank and cross-country settlements, and for retail transactions.
More than 100 countries are researching, developing or piloting a CBDC.
Nearly a dozen countries have launched a CBDC, including the Bahamas, Jamaica and Nigeria.
A CBDC "holds a lot of promise by way of ensuring transparency, and low cost of operation", the RBI said in October.
The growing popularity of cryptocurrency and financial sanctions following Russia's invasion of Ukraine have also motivated nations to test CBDCs, said Josh Lipsky, senior director of the Atlantic Council's Geo-Economics Center.
"The rise of cryptocurrency has countries like India worried about monetary sovereignty and look to offer an alternative, especially to dollar-backed stablecoins," said Lipsky, referring to virtual coins pegged to the dollar.
Globally, cash use is falling. Yet about 1.7 billion adults still do not have access to a bank account, said the World Bank.
CBDCs, accessed via e-wallets on mobile phones, can improve financial inclusion, as they can spur adoption of digital payments, the Bank for International Settlements said in a report.
Many CBDCs are designed to operate via financial systems, said Oliver Bullough, a British writer who tracks financial crimes. "...(But) that will be expensive, and I haven't seen much recognition, if any, that central banks are willing to shoulder that burden."
A bigger motivation for central banks is cracking down on money laundering and other financial crimes, said Bullough, as cash is largely untraceable, while CBDCs require an ID.
The RBI, in its concept note, said that "the potential for anonymous digital currency to facilitate shadow-economy and illegal transactions, makes it highly unlikely that any CBDC would be designed to fully match the levels of anonymity and privacy" of physical cash.
The Bahamas was first to launch a CBDC, the Sand Dollar, in 2020. But adoption remains low.
In China, the digital yuan, or e-CNY, has been tested in several cities, and was opened up to foreign visitors and athletes at the 2022 Winter Olympic Games in Beijing, even as some experts warned it was a tool for surveillance and control.
In India, digital transactions have surged in recent years, with payments for even small purchases made through the Unified Payments Interface (UPI), an RBI initiative that allows real-time transfer of funds between bank accounts.
Authorities say UPI has helped expand access to banking services and welfare programmes.
But with greater digitisation come concerns around privacy and security.
With the CBDC, the government can also enforce its adoption and use, said Srinivas Kodali at Free Software Movement of India, an advocacy group.
"India's draft data protection law gives the government broad exemptions to access all data.
"The CBDC, like other digital infrastructure in India, has been developed with no transparency, and no citizen participation."
Even bankers do not yet see a clear advantage of the e-rupee over UPI.
The writers are from the Reuters news agency
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times