Digital Rupee has potential to emerge as a neutral, scalable alternative amid global dissatisfaction with SWIFT.
NEW DELHI: Washington’s recent economic sanctions against multiple countries leveraging the US-dominated Society for Worldwide Interbank Financial Telecommunication (SWIFT), have repeatedly highlighted the vulnerabilities of the global financial system’s reliance on a single network. With $5 trillion in daily transactions across 11,000 institutions in 200 countries, SWIFT dominates the global financial landscape. As of 2024, 60% of global reserves and 88% of SWIFT transactions are denominated in dollars. These actions, often seen as economic coercion, have pushed nations to explore alternatives, though without much success thus far.
China’s Digital Currency Electronic Payment (DCEP) and Russia’s System for Transfer of Financial Messages (SPFS) aim to challenge SWIFT’s dominance, but both face substantial challenges regarding trust and scalability as they are viewed as rivals of the US.
India’s Digital Rupee (e₹), currently in its pilot phase, is uniquely positioned to provide a neutral and technologically advanced solution to address the evolving global financial landscape. The imposition of U.S. sanctions, which threaten to disconnect countries from SWIFT’s clearing system, has been criticised as “geopolitical bullying” by Professor Jeffrey Sachs, a renowned economist and public policy analyst at Columbia University.
Speaking to The Sunday Guardian, Sachs stated, “The US threatens other countries with expelling their banks from the SWIFT clearing system if they fail to comply with secondary sanctions. For this reason, BRICS countries should establish a non-dollar settlement system.”
This geopolitical pressure has spurred a global search for financial autonomy, yet existing alternatives have failed to offer a scalable solution. China’s Digital Yuan, launched in April 2020, has facilitated $7.3 trillion in domestic transactions across 180 million wallets by mid-2024. However, its cross-border transactions remain limited, totalling just $250 billion in the first half of 2023. This is largely due to global concerns over data privacy, state control, and the Renminbi’s lack of full convertibility.
Russia’s SPFS, operational since 2014 and connecting 557 institutions across 20 countries, including China, Iran, Belarus, Armenia, Tajikistan, and Kazakhstan, has been hampered by EU and U.S. sanctions aimed at undermining its role in bypassing Western systems. Despite these challenges, the Russian system managed to mitigate the domestic damage intended by the SWIFT-related sanctions. In 2022, following Western sanctions, major Russian banks like Sberbank and VTB were cut off from SWIFT. At that time, Alexei Kudrin, Russia’s former finance minister, predicted a 5% GDP contraction due to the SWIFT bans. However, the actual GDP decline for 2022 was only 2.1%, according to the IMF, indicating significant but not catastrophic damage, largely due to the operational effectiveness of SPFS. This smaller-than-expected contraction highlighted the limits of the damage that can be caused by SWIFT disruption.
Similarly, the EU’s Instrument in Support of Trade Exchanges (INSTEX), established in 2019 by France, Germany, and the United Kingdom to facilitate trade with Iran, collapsed in March 2023 under U.S. pressure, despite backing from ten European nations. The inherent limitations of such systems have highlighted the need for a trusted, neutral alternative—a role that India’s Digital Rupee could potentially fill, provided there is the necessary political will, according to official sources speaking to The Sunday Guardian.
Under Prime Minister Narendra Modi’s Digital India vision, India has developed a robust digital payments ecosystem, exemplified by the Unified Payments Interface (UPI), which processed 535 million transactions daily, totalling 16.73 billion in December 2024. UPI’s reach extends to seven countries—Sri Lanka, Mauritius, France, UAE, Singapore, Bhutan, and Nepal—demonstrating India’s ability to deploy scalable, interoperable systems.
The Digital Rupee, piloted by the Reserve Bank of India (RBI) since 2022, builds on India’s technological advancements. The wholesale pilot, known as ‘e₹-W,’ began on November 1, 2022, followed by the retail pilot (e₹-R) on December 1. As of September 2024, the retail pilot operates in 15 cities, involving 16 banks, including State Bank of India, ICICI Bank, and HDFC Bank, with over 5 million users and 400,000 merchants participating. Key features under testing include interoperability with UPI, offline transaction capabilities, programmability for innovative applications like carbon credit payments, and frameworks for cross-border transactions.
Explaining the RBI’s cautious approach, with no fixed timeline for full launch, an official stated that the priority is stability and scalability, positioning the e₹ as a global contender in the years to come.
In addition to its technological efficiency, India’s long-standing policy of non-alignment and commitment to a multi-polar world order position the Digital Rupee as a credible and unbiased player in the global financial landscape. Unlike other systems, where concerns around state control and data access prevail, India’s democratic framework and established rule of law foster confidence in the e₹’s governance and security. India’s strong diplomatic ties with smaller countries, particularly in Africa, where it has built significant goodwill through development partnerships and trade initiatives, make these nations more likely to embrace the Digital Rupee as a trusted alternative to SWIFT and DCEP.
This neutrality, coupled with India’s growing economy, its policy of non-interference in internal affairs, and expanding global trade relationships, strengthens its influence in shaping global financial infrastructure. The proven success of UPI highlights India’s ability to develop and manage large-scale digital payment systems, offering a solid foundation for the Digital Rupee to incorporate advanced features designed for international transactions.
The Digital Rupee’s pilot phase emphasises the importance of strategic planning, with experts projecting a 4–7-year timeline for it to emerge as a credible global alternative. As global discomfort with SWIFT grows and there is cautious optimism about the Digital Yuan, India is presented with a strategic opportunity—one that has not gone unnoticed in Delhi and Mumbai.
In December 2019, as reported by The Sunday Guardian (“RBI has no time to consider a digital currency”), RBI Governor Shaktikanta Das—now a member of the Prime Minister’s Office—had expressed reluctance toward adopting a digital currency.
“It is very early to speak on a central bank issuing digital currencies. Some discussions are going on. Technology has not fully evolved yet. It is still in a very incipient stage of discussions, and at RBI, we have examined it internally,” he had stated.
However, since then, India has made significant strides, establishing a robust e₹ ecosystem, with banks actively working to expand its reach.
To capitalise on this momentum, the RBI and Finance Ministry must prioritise accelerating the development and testing of features for seamless, cost-effective cross-border transactions, including UPI interoperability. They should also engage proactively with BRICS, non-aligned countries, and small and African nations to promote the adoption of e₹ through bilateral and multilateral trade agreements. Establishing clear regulatory frameworks and implementing world-class cybersecurity measures will also be critical to addressing data privacy concerns. Additionally, advocating for interoperability with SWIFT will alleviate concerns from Washington and facilitate global integration.
The Digital Rupee, with its growing ecosystem and India’s strategic diplomatic outreach, could pave the way for a phased international rollout, positioning it as a viable solution for global financial settlements. Strong security protocols and transparent governance will further bolster international confidence, overcoming the trust deficits that hinder alternatives like DCEP.
Through sustained investment in technology—an area where the RBI is already making significant progress—strategic partnerships with nations across the Global South, and strong governance frameworks, India can lead the creation of a more inclusive, autonomous, and equitable global financial order. By aligning its technological advancements with proactive global engagement, India can position the Digital Rupee as a trusted and efficient platform for international financial transactions.
Though still in its pilot phase, the Digital Rupee, backed by UPI’s success, India’s geopolitical neutrality, and a rapidly evolving digital ecosystem, presents a compelling alternative to SWIFT and DCEP.