Context

According to reports, the Reserve Bank of India (RBI) has suggested that India explore linking its digital rupee with the CBDCs of BRICS countries, and that this proposal be placed on the agenda of the 2026 BRICS Summit, to be hosted by India. This signals a subtle but important shift—from treating CBDC as a domestic experiment to viewing it as a tool of international financial cooperation.

Why Is RBI Pushing CBDCs—but Not Cryptocurrencies?

The RBI’s position has been consistent yet nuanced. On one hand, it has been deeply sceptical of private cryptocurrencies, repeatedly warning about:

• Extreme price volatility
• Fraud and market manipulation
• Absence of intrinsic value
• Risks to financial and monetary stability

On the other hand, the RBI has actively promoted CBDCs, arguing that the technology (blockchain) is useful, even if unregulated crypto-assets are not.

The distinction is crucial. CBDCs are sovereign-backed legal tender, issued by a central bank and guaranteed by the state. Unlike cryptocurrencies, they:

• Do not promise speculative returns
• Are non–interest bearing, limiting capital flight from banks
• Operate within a regulated monetary framework

But Does India Really Need a CBDC Domestically?

• India already runs one of the world’s most successful digital payment systems: Unified Payments Interface (UPI). It is fast, cheap, inclusive, and massively scalable. For everyday retail payments, UPI has a decisive first-mover advantage that a CBDC is unlikely to overcome.

The Real Opportunity: Cross-Border Payments

Cross-border transactions are among the least efficient parts of the global financial system. They are:

• Slow and expensive
• Opaque
• Vulnerable to money laundering and illicit flows

Most international payments rely on legacy systems like SWIFT, which are not universally accessible and are heavily influenced by geopolitics.

CBDCs powered by blockchain can change this. They create:

• Transparent and immutable transaction records
• Programmable compliance (origin, destination, tax linkage)
• Faster settlement with fewer intermediaries

A BRICS-level CBDC framework could even mandate integration with national identity or tax systems, striking at the heart of black money and illicit finance.

Why BRICS Matters in This Equation

A BRICS-linked CBDC system would not just be about efficiency—it would be about strategic choice.

• Ease trade payments with countries like Russia and Iran, which face restrictions on SWIFT
• Reduce dependence on the US dollar in limited, functional areas
• Strengthen South–South financial cooperation
• Moves away from dollar-centric systems are likely to invite pushback. Former U.S. President Donald Trump has already warned of additional tariffs on BRICS countries if they undermine the dollar’s dominance.
• India must therefore weigh whether incremental economic pressure would outweigh the long-term gains of payment sovereignty.

Is RBI’s Approach Balanced?

The RBI’s strategy reflects calibrated pragmatism:

• It avoids the extremes of banning technology altogether
• It resists the chaos of unregulated crypto markets
• It selectively adopts innovation where it adds systemic value
• Rather than using CBDC to replace UPI, RBI is positioning it as a geopolitical and institutional instrument—particularly in international finance.

Conclusion

• RBI’s thinking on CBDC is not just about digital money; it is about who controls payment rails in a fragmented world economy.
• Linking CBDCs within BRICS could improve transparency, reduce costs, and enhance India’s financial sovereignty—but only if managed carefully to avoid geopolitical backlash.

BRICS

• BRICS is a grouping of major emerging economies
• Original members: Brazil, Russia, India, China
• South Africa joined: 2010
• New members (from 2024): Egypt, Ethiopia, Iran, UAE
• Indonesia joined: January 2025
• Focus areas:

• • Financial cooperation & de-dollarisation
  • New Development Bank (NDB)
  • Technology and digital public infrastructure
  • India will host the BRICS Summit in 2026