Central Bank Digital Currency (CBDC) Claims 

1. Introduction

Central Bank Digital Currency (CBDC) claims are legal claims, disputes, regulatory proceedings, consumer complaints, or constitutional challenges arising from the issuance, use, transfer, regulation, security, privacy, or alleged misuse of a digital currency issued by a central bank.

In India, the relevant CBDC is the Digital Rupee (e₹) issued by the Reserve Bank of India (RBI).

A CBDC differs fundamentally from a private cryptocurrency such as Bitcoin. A CBDC is central-bank money, whereas cryptocurrencies are generally privately created or decentralised digital assets.

CBDC disputes can therefore involve:

• RBI's statutory powers;
• monetary sovereignty;
• payment-system regulation;
• digital-wallet disputes;
• unauthorised transactions;
• cybersecurity;
• privacy;
• consumer protection;
• taxation;
• money laundering;
• contractual liability;
• banking regulation;
• constitutional rights;
• data protection;
• intermediary liability.

2. Meaning of CBDC

A Central Bank Digital Currency is a digital form of sovereign currency issued by a country's central bank.

In India's case:

Digital Rupee/e₹ is a digital representation of the Indian rupee issued by the Reserve Bank of India.

The RBI has introduced CBDC in two principal forms:

A. Retail CBDC – CBDC-R

Designed primarily for:

• individuals;
• consumers;
• merchants;
• retail payments.

B. Wholesale CBDC – CBDC-W

Designed primarily for:

• financial institutions;
• banks;
• securities-market transactions;
• interbank settlement.

3. Legal Character of CBDC

CBDC must be distinguished from cryptocurrency.

Therefore, a claim concerning a CBDC cannot automatically be analysed using the same legal principles applicable to Bitcoin or other cryptocurrencies.

4. Principal Indian Legal Framework

CBDC claims may involve several laws.

A. Reserve Bank of India Act, 1934

The RBI Act provides the statutory foundation for India's monetary and currency framework.

Important areas include:

• issue of bank notes;
• monetary authority;
• currency management;
• regulation of payment-related systems.

The precise legal architecture of CBDC therefore has to be understood in conjunction with RBI's statutory powers and the amendments and regulatory framework applicable to digital currency.

5. Payment and Settlement Systems Act, 2007

The Payment and Settlement Systems Act, 2007 is particularly important.

It regulates payment systems and gives the RBI significant powers concerning:

• authorisation;
• regulation;
• supervision;
• standards;
• payment-system operators.

A dispute concerning CBDC payment infrastructure may therefore raise questions under this legislation.

6. Information Technology Act, 2000

CBDC transactions are technologically mediated.

Consequently, the Information Technology Act may become relevant to:

• unauthorised access;
• computer-related offences;
• electronic records;
• electronic authentication;
• cybersecurity;
• intermediary issues.

Where a CBDC wallet is compromised through cyber intrusion, the dispute may involve both financial regulation and cyber law.

7. Digital Personal Data Protection Act, 2023

CBDC systems may process significant amounts of information.

Potentially relevant information includes:

• transaction data;
• wallet information;
• authentication information;
• device-related information;
• identity information.

Consequently, privacy and data-governance issues may arise under India's data-protection framework.

8. Prevention of Money Laundering Act, 2002

CBDC systems may also intersect with:

• KYC requirements;
• suspicious transactions;
• anti-money-laundering controls;
• beneficial ownership;
• financial intelligence.

CBDC does not create an exemption from India's AML framework.

9. Consumer Protection Act, 2019

Where CBDC wallets or related services are supplied to consumers through banks or payment intermediaries, disputes may potentially involve consumer law.

Examples include:

• unauthorised debit;
• failure of a payment service;
• defective digital wallet;
• wrongful blocking of funds;
• misleading representations;
• deficient service.

However, the exact applicability depends upon the nature of the transaction and the parties involved.

10. Contract Law

A CBDC ecosystem can contain multiple contractual relationships:

RBI → regulated institutions → wallet/service provider → consumer/merchant

Disputes may concern:

• wallet terms;
• payment instructions;
• merchant agreements;
• banking agreements;
• service-level commitments;
• liability for unauthorised transactions.

The Indian Contract Act, 1872 may therefore become relevant.

11. Types of CBDC Claims

CBDC claims can broadly be divided into the following categories.

1. Constitutional claims

Challenges to:

• RBI powers;
• mandatory digital payment systems;
• privacy implications;
• restrictions on financial activity.

2. Consumer claims

Claims concerning:

• failed transactions;
• unauthorised transfers;
• loss of funds;
• defective services.

3. Cybersecurity claims

Claims arising from:

• hacking;
• phishing;
• wallet compromise;
• credential theft;
• system vulnerabilities.

4. Privacy claims

Claims concerning:

• transaction surveillance;
• excessive data collection;
• unauthorised disclosure;
• profiling.

5. Contractual claims

Disputes between:

• banks and customers;
• wallet operators and users;
• merchants and payment intermediaries.

6. Regulatory claims

Disputes involving:

• RBI directions;
• licensing;
• compliance;
• KYC;
• AML requirements.

7. Tax claims

Questions concerning:

• treatment of CBDC transactions;
• reporting;
• business income;
• capital gains where applicable;
• GST implications of underlying transactions.

12. Unauthorised CBDC Transaction Claims

One of the most important future areas of CBDC litigation is likely to involve unauthorised transactions.

For example:

A person's digital rupee wallet is compromised and ₹50,000 is transferred without authorisation.

The legal questions include:

1. Was the transaction actually authorised?
2. Was the wallet compromised?
3. Was there negligence by the customer?
4. Was the bank or intermediary negligent?
5. Was authentication properly performed?
6. Did the system have adequate security controls?
7. Who bears the loss?
8. Was the transaction reversible?
9. What evidence exists in the electronic transaction record?

13. Cybersecurity Liability

CBDC systems require a high level of cybersecurity.

Potential claims may arise from:

• inadequate authentication;
• malware;
• phishing;
• SIM compromise;
• device theft;
• insider fraud;
• system intrusion;
• denial-of-service attacks.

The legal responsibility may depend upon the particular architecture of the CBDC system.

14. Privacy Claims

CBDC potentially creates a difficult legal question:

How can a central-bank digital payment system provide traceability required for financial regulation while protecting legitimate financial privacy?

CBDC transactions may generate detailed transaction records.

Privacy claims could concern:

• who can access transaction data;
• how long data is retained;
• whether transactions are traceable;
• whether data is shared with third parties;
• whether transaction information can be used for profiling.

15. Article 21 and Informational Privacy

The Supreme Court's recognition of privacy as a fundamental right is particularly significant.

A CBDC privacy challenge could potentially invoke:

• Article 21;
• proportionality;
• legality;
• legitimate state purpose;
• necessity;
• procedural safeguards.

The central constitutional question would be whether the collection or use of financial information satisfies constitutional requirements.

16. CBDC and Financial Surveillance

A CBDC can potentially improve:

• AML enforcement;
• tax compliance;
• detection of financial crime.

However, extensive transaction visibility could also raise concerns about:

• surveillance;
• informational autonomy;
• confidentiality;
• excessive state access.

Indian courts would likely examine such questions through the constitutional framework developed in privacy jurisprudence.

17. CBDC and Freedom of Trade

Businesses may potentially challenge regulations affecting their ability to:

• accept digital rupees;
• provide digital-payment services;
• operate payment platforms;
• provide competing digital financial products.

Such claims may involve:

• Article 19(1)(g);
• reasonable restrictions;
• RBI regulatory authority;
• public interest.

18. CBDC and Article 300A

A difficult question could arise where digital currency is frozen or confiscated.

Article 300A provides that:

No person shall be deprived of property save by authority of law.

A dispute involving freezing or confiscation of digital currency could therefore raise questions concerning:

• legal authority;
• procedural fairness;
• statutory power;
• proportionality;
• property rights.

The precise application would depend upon the legal nature of the CBDC and the statutory mechanism used to restrict access.

19. CBDC and Taxation

CBDC does not necessarily create a completely separate tax universe.

The underlying transaction may still be subject to applicable taxation.

For example:

A business receives ₹10 lakh in digital rupees for supplying goods.

The fact that payment is made through CBDC does not automatically eliminate:

• income-tax consequences;
• GST consequences;
• accounting obligations;
• reporting requirements.

20. CBDC and Money Laundering

CBDC could potentially be used for unlawful financial activity.

Examples include:

• layering;
• concealment of proceeds;
• fraudulent transfers;
• terrorist financing;
• tax evasion.

Therefore, CBDC infrastructure may incorporate:

• KYC;
• transaction monitoring;
• suspicious transaction reporting;
• wallet controls;
• risk-based restrictions.

21. CBDC and Smart Contracts

Future CBDC infrastructure could potentially interact with programmable-payment systems.

For example:

₹1 lakh of digital currency is automatically released when a specified contractual condition is fulfilled.

This raises questions concerning:

• contract formation;
• programming errors;
• mistaken payments;
• reversal;
• force majeure;
• automated execution;
• liability for coding defects.

Traditional contract law may therefore have to interact with technological rules.

22. Important Case Laws

Because India's retail CBDC is relatively new, there is not yet a large body of reported Indian Supreme Court or High Court case law specifically deciding CBDC disputes.

Therefore, the most useful authorities are cases dealing with the legal principles that will govern CBDC disputes—particularly RBI powers, cryptocurrency regulation, privacy, electronic transactions, banking regulation and proportionality.

Case 1: Internet and Mobile Association of India v. Reserve Bank of India

Internet and Mobile Association of India v. Reserve Bank of India, (2020) 10 SCC 274

This is the most important Indian Supreme Court authority concerning digital currencies and RBI regulation.

The RBI had issued a circular restricting regulated entities from dealing with persons/entities dealing in virtual currencies.

The Supreme Court examined the RBI's regulatory power and applied the principle of proportionality.

Principle

A regulatory restriction imposed by a statutory authority must satisfy constitutional proportionality requirements.

Importance for CBDC

The case is important because it establishes that:

RBI's regulatory authority over digital financial activity is subject to constitutional review.

A future challenge to a CBDC regulation could therefore potentially rely upon the reasoning in this case.

Case 2: K.S. Puttaswamy v. Union of India

Justice K.S. Puttaswamy (Retd.) v. Union of India, (2017) 10 SCC 1

This landmark Supreme Court decision recognised privacy as a fundamental right under Article 21.

Principle

Privacy includes aspects of:

• informational autonomy;
• personal liberty;
• dignity;
• control over personal information.

Importance for CBDC

CBDC systems could generate extensive financial information.

A challenge concerning government access to CBDC transaction records could therefore raise:

• privacy;
• proportionality;
• legitimate state purpose;
• necessity;
• safeguards.

This is arguably one of the most important constitutional precedents for future CBDC privacy litigation.

Case 3: K.S. Puttaswamy (Aadhaar) v. Union of India

K.S. Puttaswamy (Retd.) v. Union of India, (2019) 1 SCC 1

The Supreme Court considered the constitutional validity of aspects of the Aadhaar framework.

Principle

Collection and use of personal information by the State must satisfy constitutional requirements, including legality and proportionality.

Importance for CBDC

CBDC may involve identity-linked financial transactions.

Accordingly, litigation could arise concerning:

• mandatory identification;
• transaction monitoring;
• data retention;
• access to financial information;
• identity authentication.

The Aadhaar jurisprudence provides an important analytical framework.

Case 4: Justice K.S. Puttaswamy (Retd.) v. Union of India – Privacy Bench

The broader Puttaswamy jurisprudence is significant because the Supreme Court established a constitutional framework for restrictions upon privacy.

Key requirements

A privacy-infringing measure should have:

1. Legality
2. Legitimate State aim
3. Necessity
4. Proportionality
5. Procedural safeguards

CBDC application

If the State were to create a CBDC architecture involving extensive surveillance of all transactions, a constitutional challenge could be examined using this framework.

Case 5: Internet and Mobile Association of India v. RBI – Proportionality

The cryptocurrency judgment is particularly important because it demonstrates that even an expert financial regulator's decision can be subjected to constitutional scrutiny.

Principle

Expertise of the regulator does not completely immunise regulatory action from judicial review.

CBDC relevance

If RBI or another authority imposes restrictions on:

• CBDC wallets;
• intermediaries;
• payment service providers;
• digital-asset transactions;

the affected party may potentially challenge the measure if it exceeds statutory authority or violates constitutional requirements.

Case 6: Shreya Singhal v. Union of India

Shreya Singhal v. Union of India, (2015) 5 SCC 1

This landmark case concerned online speech and the constitutional validity of Section 66A of the Information Technology Act.

Principle

Restrictions affecting digital activity must satisfy constitutional requirements.

Relevance to CBDC

Although not a monetary case, the decision is relevant to the broader constitutional regulation of digital technologies.

It reinforces that:

Digital technology does not operate outside constitutional protections.

Where CBDC regulations affect legally protected activity, constitutional scrutiny remains applicable.

Case 7: Anvar P.V. v. P.K. Basheer

Anvar P.V. v. P.K. Basheer, (2014) 10 SCC 473

The Supreme Court examined the evidentiary treatment of electronic records.

Principle

Electronic evidence must satisfy the statutory requirements governing admissibility.

CBDC relevance

CBDC disputes will necessarily depend heavily on electronic records such as:

• transaction logs;
• wallet records;
• authentication records;
• digital instructions;
• electronic communications.

Therefore, the principles concerning electronic evidence are highly relevant to proving or defending CBDC claims.

Case 8: Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal

Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal, (2020) 7 SCC 1

The Supreme Court clarified important aspects of electronic evidence under the Evidence Act framework.

Principle

Electronic records require compliance with the statutory evidentiary framework.

CBDC relevance

Suppose a consumer alleges:

"I never authorised the transfer of ₹2 lakh from my digital rupee wallet."

The court may need to examine:

• electronic logs;
• authentication data;
• system-generated records;
• device information;
• transaction records.

The principles concerning electronic evidence become critical.

Case 9: State Bank of India v. Shyama Devi

State Bank of India v. Shyama Devi, (1978) 3 SCC 399

This is an important banking-law decision concerning responsibility for transactions and the evidentiary burden surrounding banking operations.

Principle

Questions of negligence, authority and responsibility in banking transactions depend upon the facts and evidence surrounding the transaction.

CBDC relevance

Although CBDC is technologically different from conventional banking, similar questions may arise:

• Who initiated the transaction?
• Was authority given?
• Was there negligence?
• Did the institution follow appropriate procedures?
• Who should bear the loss?

Case 10: Canara Bank v. Canara Sales Corporation

Canara Bank v. Canara Sales Corporation, (1987) 2 SCC 666

This Supreme Court case concerned forged cheques and the responsibility of banks in relation to unauthorised transactions.

Principle

Banking institutions cannot simply assume that every transaction is genuine where the circumstances disclose negligence or failure of appropriate safeguards.

CBDC relevance

The technological form changes, but the fundamental legal issue remains relevant:

Who should bear the loss resulting from an unauthorised digital financial transaction?

This case can therefore provide conceptual guidance for CBDC-wallet disputes.

23. Combined Significance of the Case Law

The cases can be grouped as follows:

24. CBDC Claims Before Courts – Possible Causes of Action

A CBDC-related claimant could potentially formulate claims based upon:

A. Statutory illegality

The authority acted beyond the powers granted by legislation.

B. Constitutional violation

For example:

• Article 14;
• Article 19;
• Article 21;
• Article 300A.

C. Contractual breach

A bank or intermediary failed to comply with contractual obligations.

D. Deficiency in service

A consumer-facing financial service failed to meet applicable standards.

E. Negligence

A financial institution or service provider failed to maintain reasonable security.

F. Data/privacy violation

Personal information was unlawfully processed or disclosed.

G. Cybercrime

Funds were transferred through hacking, fraud or unauthorised access.

25. Article 14 and CBDC Regulation

Article 14 could become relevant where a CBDC regulation is challenged as:

• arbitrary;
• discriminatory;
• irrational;
• disproportionate.

For example, if similarly situated payment providers are subjected to fundamentally different regulatory burdens without a rational basis, Article 14 arguments may arise.

26. Article 19(1)(g)

Businesses involved in:

• financial technology;
• payment services;
• wallet infrastructure;
• merchant services;

could potentially invoke Article 19(1)(g).

However, the right to carry on business is subject to reasonable restrictions under Article 19(6.

Therefore:

Financial regulation can legitimately restrict business activity when constitutionally justified.

27. Article 21 and CBDC Privacy

CBDC creates an especially important privacy question because money is closely connected with personal autonomy.

Financial transactions can reveal:

• where a person spends money;
• what services they use;
• political or charitable contributions;
• travel;
• lifestyle;
• commercial relationships.

Accordingly, unrestricted access to CBDC transaction histories could potentially raise serious informational-privacy questions.

28. CBDC and Right to Property

Digital currency represents economic value.

If an authority freezes a person's CBDC balance, the legal questions may include:

1. What statutory power authorises the freeze?
2. Was the person given procedural safeguards?
3. Is the freezing order temporary or permanent?
4. Can the person challenge it?
5. Is judicial or administrative review available?

Article 300A may become relevant depending upon the precise legal characterization of the asset and the statutory action.

29. CBDC Fraud Claims

A typical CBDC fraud case may involve:

A fraudster obtains a user's authentication credentials and transfers CBDC to another wallet.

The legal analysis could involve:

Criminal law

Fraud, cheating, identity-related offences and cyber offences.

IT law

Unauthorised access or manipulation of computer resources.

Banking/payment law

Responsibility of the intermediary.

Contract law

Terms governing customer responsibility.

Evidence law

Proof of authentication and transaction history.

30. CBDC and Jurisdiction

CBDC is inherently capable of being transferred digitally.

Therefore, a transaction may involve:

• customer in Delhi;
• bank in Mumbai;
• intermediary infrastructure in another location;
• merchant in Bengaluru.

Questions may arise concerning:

• territorial jurisdiction;
• place where the transaction occurred;
• location of loss;
• contractual jurisdiction clause;
• applicable procedural law.

Traditional jurisdiction principles may have to be adapted to digital financial infrastructure.

31. CBDC and Insolvency

Another important future issue is the treatment of CBDC when an intermediary becomes insolvent.

Questions could include:

• Does the CBDC belong to the customer?
• Is it held in custody?
• Does the intermediary have proprietary rights?
• Can creditors attach it?
• Can customers claim priority?
• How are wallets transferred after insolvency?

These issues will depend heavily upon the legal architecture adopted for CBDC custody and intermediaries.

32. CBDC and Consumer Protection

Consumer disputes may arise from:

• wallet malfunction;
• payment failure;
• double debit;
• mistaken transfer;
• blocked account;
• unauthorised transaction;
• inadequate grievance redressal.

The consumer would need to establish the applicable legal relationship and statutory jurisdiction.

33. CBDC Claims and Evidence

Evidence will be especially important.

Relevant evidence may include:

• transaction IDs;
• wallet records;
• timestamps;
• authentication records;
• device information;
• OTP records;
• system logs;
• communications;
• bank statements;
• blockchain/distributed-ledger records where applicable;
• forensic reports.

Electronic evidence principles therefore become central to CBDC litigation.

34. CBDC and Blockchain

It is important not to assume that every CBDC must use blockchain.

A CBDC can potentially use:

• centralised databases;
• distributed ledger technology;
• hybrid architecture;
• token-based systems;
• account-based systems.

Therefore, the legal analysis should focus on the actual architecture adopted, rather than automatically equating CBDC with cryptocurrency or blockchain.

35. CBDC Claims – Exam-Oriented Legal Test

For a CBDC dispute, a court may effectively have to consider:

Question 1

Is the CBDC activity authorised by statute?

Question 2

Which institution exercised the disputed power?

Question 3

What is the legal relationship between the parties?

Question 4

Was the transaction authorised?

Question 5

Was there negligence or fraud?

Question 6

Was personal information processed lawfully?

Question 7

Does the measure infringe a fundamental right?

Question 8

Is the restriction proportionate?

Question 9

What evidence proves the transaction?

Question 10

What remedy is legally available?

36. Difference Between CBDC Claims and Cryptocurrency Claims

The Internet and Mobile Association of India v. RBI case is particularly important for understanding the constitutional limits of cryptocurrency regulation, but it should not be treated as a direct judicial determination concerning India's CBDC.

37. Future Areas of CBDC Litigation in India

India is likely to see litigation concerning:

1. CBDC privacy
2. Unauthorised digital transactions
3. Wallet hacking
4. Freezing of CBDC
5. Tax treatment
6. Consumer protection
7. Data retention
8. Cross-border CBDC transactions
9. Interoperability
10. Programmable money
11. Smart-contract disputes
12. Bank/intermediary liability
13. AML/KYC requirements
14. Constitutional challenges
15. Digital evidence

38. Important Legal Principles at a Glance

Principle 1

CBDC is sovereign digital money, not merely another cryptocurrency.

Principle 2

RBI's regulatory powers remain subject to statutory and constitutional limits.

Principle 3

Privacy protections apply to digital financial information.

Principle 4

Electronic records will be central to proving CBDC transactions.

Principle 5

Unauthorised digital transactions raise questions of authentication, negligence and allocation of loss.

Principle 6

CBDC does not eliminate ordinary contractual or consumer-law remedies.

Principle 7

Government restrictions on CBDC activity may be tested for legality, reasonableness and proportionality.

Principle 8

The exact CBDC architecture matters enormously when determining legal responsibility.

39. Conclusion

Central Bank Digital Currency claims represent an emerging field of Indian financial and technology law. Unlike cryptocurrency disputes, CBDC disputes are closely connected with the sovereign monetary system and the statutory powers of the Reserve Bank of India.

At present, Indian courts do not have an extensive body of reported decisions dealing specifically with Digital Rupee/CBDC claims. Consequently, the strongest legal framework comes from cases dealing with the underlying principles of:

• RBI regulatory authority;
• digital financial regulation;
• privacy;
• proportionality;
• electronic evidence;
• banking liability;
• unauthorised transactions.

The most important authorities include:

1. Internet and Mobile Association of India v. Reserve Bank of India – proportionality and RBI regulation of digital currencies.
2. K.S. Puttaswamy v. Union of India – constitutional right to privacy.
3. K.S. Puttaswamy (Aadhaar) v. Union of India – informational privacy, legality and proportionality.
4. Shreya Singhal v. Union of India – constitutional protection in the digital environment.
5. Anvar P.V. v. P.K. Basheer – electronic evidence.
6. Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal – admissibility and proof of electronic records.
7. State Bank of India v. Shyama Devi – banking transaction responsibility.
8. Canara Bank v. Canara Sales Corporation – forged/unauthorised banking transactions and bank responsibility.

Accordingly, the future law of CBDC claims in India will probably develop at the intersection of central banking law + constitutional law + privacy law + cyber law + consumer protection + contract law + electronic evidence.

In essence, CBDC litigation will not be governed by a single “CBDC law.” Its legal consequences will depend upon the nature of the disputed transaction, the statutory authority involved, the technological architecture, the contractual relationship, the privacy implications and the specific rights allegedly violated.