FM Sitharaman pushes RBI to sharpen digital rupee as tokenisation takes off
At the Global Fintech Fest 2026 in Mumbai, the Finance Minister urged the Reserve Bank of India to advance its wholesale and retail Central Bank Digital Currency (digital rupee) pilots as asset tokenisation accelerates across financial markets
India's first tokenised corporate bond pilot, completed by REC Limited under the Securities and Exchange Board of India's regulatory sandbox, was cited as an example in which bond settlement and digital rupee movement occurred at the same instant
On artificial intelligence, a call was made for a calibrated, "soft-touch" regulatory approach that preserves innovation while addressing risks such as AI-enabled cyberattacks and the potential for AI models to influence elections without users' awareness
Greater coordination among financial sector regulators and a degree of industry self-regulation were also urged, given that fintech, AI, and digital platforms operate across borders while regulatory frameworks remain national
Central Bank Digital Currency (Digital Rupee / e₹) — Legal and Operational Framework
India's Central Bank Digital Currency, the digital rupee (e₹), was enabled through the Finance Act, 2022, which amended the Reserve Bank of India Act, 1934 — expanding the definition of "bank note" under Section 2 to include "currency in digital form" and extending the RBI's exclusive currency-issuance power under Section 22 to cover it. The RBI subsequently launched a Wholesale pilot (e₹-W) on 1 November 2022, initially for settlement of secondary market government securities transactions, followed by a Retail pilot (e₹-R) on 1 December 2022 in a closed user group across select banks and cities.
Key Details
- Statutory basis: RBI Act, 1934, Sections 2 and 22, as amended by the Finance Act, 2022
- e₹-W (Wholesale) launched: 1 November 2022 — government securities settlement use case
- e₹-R (Retail) launched: 1 December 2022 — initial phase with four banks (State Bank of India, ICICI Bank, Yes Bank, IDFC First Bank) across four cities (Mumbai, New Delhi, Bengaluru, Bhubaneswar)
- The digital rupee carries legal tender status under Section 26(1) of the RBI Act, distinguishing it from private cryptocurrencies
The Finance Minister's call to "sharpen" the digital rupee refers to expanding these existing pilots' scale and use cases — particularly to serve as the settlement leg for tokenised financial assets.
Tokenisation and Atomic (Simultaneous) Settlement
Tokenisation refers to representing a financial asset (a bond, deposit, or security) as a digital token on a shared ledger, enabling instantaneous, simultaneous exchange of the asset and its payment leg — a mechanism often called Delivery versus Payment (DvP) or "atomic settlement." The REC Limited tokenised corporate bond pilot, conducted under SEBI's regulatory sandbox framework, demonstrated this by settling the bond token and the digital rupee payment in the same instant, eliminating the settlement lag and counterparty risk present in traditional T+1/T+2 settlement cycles.
Key Details
- DvP/atomic settlement: the asset transfer and payment transfer are contractually and technically linked so that one cannot occur without the other
- SEBI's regulatory sandbox allows live but limited-scale market testing of new financial technologies under regulatory supervision before full-scale rollout
- A functioning CBDC is considered a prerequisite for public-sector-backed atomic settlement of tokenised assets, since it provides risk-free central bank money as the payment leg
- Globally, most tokenisation pilots (including in the EU and Singapore) similarly converge on the question of what serves as the "money leg" — commercial bank money, stablecoins, or a CBDC
This was the direct example cited to argue that the digital rupee's role must expand in step with tokenisation, since every tokenised-asset settlement architecture ultimately needs a digital, risk-free settlement currency.
India's "Soft-Touch" Approach to AI Governance
India's Ministry of Electronics and Information Technology (MeitY) has adopted a light-touch, innovation-first AI governance approach rather than a standalone AI statute (unlike the European Union's binding AI Act). This approach applies existing laws — the Information Technology Act, 2000, the Digital Personal Data Protection Act, 2023, and the Consumer Protection Act — supplemented by voluntary principles, self-certification, regulatory sandboxes, and an AI incident-reporting mechanism, rather than pre-approval requirements.
Key Details
- No dedicated AI law in India as of 2026; existing IT Act, DPDP Act, 2023, and Consumer Protection Act provide the legal backbone
- MeitY's AI governance framework is built around voluntary principles and an AI Governance Group/Safety Institute structure, emphasising accountability and incident reporting over pre-clearance
- Regulatory sandboxes (as used by SEBI for tokenisation) are the preferred tool for supervised experimentation across both fintech and AI domains
- The RBI separately maintains its own regulatory sandbox for fintech innovations, first introduced in 2019
The Finance Minister's call for "soft-touch" AI regulation aligns with this existing national posture, seeking similar sandbox-based, self-regulatory tools for AI as already used for tokenisation pilots.
Regulatory Coordination in Cross-Border Fintech
Because fintech products, AI models, and digital platforms are inherently borderless — often built in one jurisdiction using infrastructure or serving customers in another — while financial and technology regulation remains national, coordination among domestic regulators (RBI, SEBI, IRDAI, and others) and international regulatory dialogue are increasingly emphasised. This includes calls for a "federated" industry platform to give India's fintech sector a collective voice in shaping interoperable, cross-border standards.
Key Details
- Indian financial regulators operate under Financial Stability and Development Council (FSDC) coordination, chaired by the Finance Minister, for cross-regulator issues
- Interoperability standards (e.g., for CBDC-linked settlement or cross-border payments) are being discussed multilaterally, including through BRICS-level cross-border payment initiatives
- Industry self-regulation, combined with statutory sandbox frameworks, is positioned as a middle path between no regulation and prescriptive, EU-style rulebooks
The call for greater regulatory coordination reflects the practical challenge that tokenisation and AI innovation cut across the RBI's, SEBI's, and MeitY's separate regulatory domains simultaneously.
- Digital rupee (e₹) legal basis: RBI Act, 1934, Sections 2 and 22, amended by the Finance Act, 2022
- e₹-W (Wholesale) pilot launched: 1 November 2022; e₹-R (Retail) pilot launched: 1 December 2022
- Retail pilot's first phase: 4 banks (SBI, ICICI Bank, Yes Bank, IDFC First Bank), 4 cities (Mumbai, New Delhi, Bengaluru, Bhubaneswar)
- REC Limited's tokenised corporate bond pilot: India's first, conducted under SEBI's regulatory sandbox
- India has no standalone AI law as of 2026; governance relies on IT Act 2000, DPDP Act 2023, and voluntary/sandbox mechanisms under MeitY
- RBI's fintech regulatory sandbox framework: first introduced in 2019