MONEY IS GOING DIGITAL : Banks, Banking and Customers in the Age of Digital Currencies, Crypto and Beyond

 

BIZ MASALA  |  FORENSIC FINANCE SERIES

MONEY IS GOING DIGITAL

Banks, Banking and Customers in the Age of Digital Currencies, Crypto and Beyond

By Murthy ASR | Forensic Edition | 10 October 2026

Hero artwork: illustrative composition; not a photograph or a claim that digital money, bank deposits and crypto are interchangeable.

 

Executive finding | The fight is over the customer relationship

Money is becoming more digital, but digital money is not one thing. A bank-account balance is a claim on a commercial bank; the digital rupee is a direct liability of the Reserve Bank of India; Bitcoin is a crypto asset, not a claim on the RBI or a commercial bank; and a stablecoin is a privately issued token designed to track a reference asset, with risks that depend on its reserves, legal structure and redemption arrangements.

The future is unlikely to be a simple contest in which crypto replaces banks. It is a struggle over who controls the customer interface, holds customer data, processes payments, provides credit, safeguards assets and settles obligations. Banks may lose some control over interfaces while retaining deposits, lending and regulated settlement roles; technology firms may gain distribution power; tokenisation may change market infrastructure; and customers may gain convenience while facing new fraud, privacy and operational risks.

The Bank for International Settlements' 2025 blueprint discusses tokenised central-bank reserves, commercial-bank money and government bonds on programmable platforms. Its 2026 analysis warns that stablecoins raise questions around trust, financial integrity and monetary sovereignty. These are policy assessments, not proof that one future architecture is inevitable.

The central battle is not cash versus crypto; it is who controls the rails, the customer, the data and the trust behind every digital transaction.

1 | Decode the money: five different instruments

Original Biz Masala graphic. Legal status, redemption and risk differ by instrument and jurisdiction.

Cash is physical central-bank money. A commercial-bank deposit is a liability of the bank, governed by banking rules and applicable deposit-protection arrangements. The digital rupee (e₹) is a digital form of the rupee issued by the RBI. A crypto asset such as Bitcoin is not a claim on the RBI or a commercial bank. A stablecoin aims to track a reference asset, but that depends on its issuer, reserves, redemption rights and legal safeguards.

UPI is a payment system, not a separate currency. A QR code is a way to initiate payment; it does not identify the underlying settlement asset. The customer sees a screen, but the financial system must still establish who owes whom and when settlement is final.

2 | The customer journey: the screen is not the settlement

Original payment-flow diagram: interfaces and settlement assets are different layers.

A customer may tap a bank app, scan a QR code, use a wallet or initiate a crypto transfer. These are different interfaces and systems. Behind them sit payment rails, identity checks, fraud controls, settlement arrangements and dispute rules. The user experience may look similar while legal and operational outcomes are very different.

The forensic questions are practical: Who holds the funds? Who can stop a transaction? What happens if a payment goes to the wrong person? Can it be reversed? Who investigates fraud? Which complaint channel is accountable? What happens if an app, exchange or wallet provider fails? These are not side issues; they define the financial product.

Illustrative visual: the digital rupee alongside banks and private crypto assets; these are distinct instruments.

Illustrative digital-finance scene: sovereign digital money, bank infrastructure and crypto markets shown together for comparison.

3 | India's digital rupee: sovereign money in digital form

The RBI describes e₹ as the digital form of India's currency, issued by the central bank and distributed through participating banks and non-banks. The retail pilot began in December 2022 and the wholesale pilot in November 2022. RBI material describes retail person-to-person and person-to-merchant payments, wallet-based use, exploration of offline capabilities and programmability, and wholesale settlement use cases including government securities and interbank call-money transactions.

The issuer matters: e₹ is a direct RBI liability, unlike a commercial-bank deposit. But the digital rupee is not simply 'UPI with a new logo'. UPI moves money between accounts using existing bank and payment-system arrangements; CBDC is a digital form of central-bank money. They may coexist and could interoperate in specific use cases.

The promise is potential: new payment options, improved settlement, possible offline use and programmable disbursements. The tests are practical: repeat usage, merchant acceptance, reliability, privacy, accessibility, operating costs and clear customer protections. Pilot participation or downloads alone do not prove mass adoption.

Official source: RBI, Digital Rupee (e₹) FAQs, 9 January 2025 — https://www.rbi.org.in/scripts/FAQView.aspx/upload/FAQView.aspx?Id=169

Customer-level view: QR-based payments in a small Indian shop; generated illustrative artwork.

4 | UPI: a digital payments success—and a different layer

UPI has made account-to-account payments easy for consumers and merchants, but payment success does not mean every layer of the financial system has been transformed. A payment interface can be successful while banks remain deposit-takers, lenders and account providers. Payment apps can own customer attention and user experience without owning the underlying money.

The business question is who captures value. Banks may earn through deposits, lending, merchant services and other products; payment apps may compete for distribution, engagement and adjacent services; merchants may benefit from faster collection but still face reconciliation, fraud and working-capital questions. The economics vary by service and policy regime.

5 | Crypto: an asset, a network and a business ecosystem

Bitcoin, Ethereum and other crypto assets have different network designs and use cases. Some users seek speculative exposure, some use them to transfer value, and some networks support smart-contract applications. These functions should be assessed separately: a token's price performance does not prove its usefulness as money, and programmability does not automatically make a sound financial product.

Risks include volatility, exchange or custodian failure, scams, compromised private keys, smart-contract vulnerabilities, liquidity shocks and uncertainty about legal recourse across borders. Decentralisation can reduce reliance on a single operator in some respects, but it does not eliminate reliance on software, validators, exchanges, stablecoin issuers, bridges or governance.

India's tax treatment matters. The Income Tax Department's published material describes a 1% TDS requirement under section 194S for qualifying consideration paid on transfers of virtual digital assets, subject to statutory thresholds and conditions. Tax treatment is not regulatory endorsement or deposit protection; current law and rules should be checked before publication or financial decisions.

Official source: Income Tax Department, TDS on transfer of VDAs — https://www.incometaxindia.gov.in/w/tds-on-payment-for-the-transfer-of-virtual-digital-assets-vdas-

6 | Stablecoins: bridge—or fault line?

Stablecoins are privately issued digital tokens designed to maintain a value relative to an asset, often a fiat currency. They may be used for crypto-market settlement and some cross-border transfers. Their credibility depends on reserve quality and liquidity, holders' legal claims, redemption access, issuer governance and the resilience of the network.

A stablecoin is not the same as a bank deposit or central-bank money. If confidence in reserves or redemption breaks down, the token may trade below its intended value. Wider use could shift payment activity outside domestic banking channels and complicate monetary sovereignty, financial-integrity enforcement and crisis management. The BIS's 2026 analysis highlights these concerns and argues for bringing useful tokenisation features into trusted monetary arrangements.

Avoid two extremes: treating stablecoins as inherently worthless, or assuming a dollar-linked token is as safe as a dollar deposit. The answer depends on design, law, reserves, redemption and supervision.

Illustrative scene of tokenisation, financial infrastructure and programmable digital assets.

7 | Beyond crypto: tokenised deposits, securities and programmable settlement

Tokenisation means representing an asset or claim digitally on a programmable platform. The asset might be a bond, deposit, fund interest or another financial claim. The innovation is not merely a digital image of an asset; it is the possibility of coordinating instructions, compliance checks and settlement more closely, reducing reconciliation and counterparty frictions in selected workflows.

Original conceptual framework: trusted digital finance requires money, assets, settlement and customer protection to work together.

The BIS's 2025 unified-ledger proposal links tokenised central-bank reserves, commercial-bank money and government bonds. In principle, this could support atomic settlement, collateral mobility and more efficient cross-border or securities transactions. In practice, interoperability, legal finality, privacy, cybersecurity, governance and access remain difficult. A pilot is not proof of scalable commercial success.

The larger possibility is a system in which an asset and its payment leg settle together under defined conditions. That could change securities markets, trade finance and collateral management more profoundly than consumer-facing crypto speculation. It could also concentrate technical power among infrastructure providers if governance and access are poorly designed.

Source: BIS, 'Next-generation monetary and financial system takes shape, based on a tokenised unified ledger', 24 June 2025 — https://www.bis.org/media-releases/20250624-next-generation-monetary-and-financial-system-takes-shape-based-tokenised-unified-ledger-bis

8 | Banks: threatened intermediaries or indispensable trust providers?

Banks face pressure at the customer interface and in selected payment and settlement services. But their role is broader than moving money: they underwrite credit, assess borrowers, transform maturities, manage liquidity, perform compliance checks and operate under prudential rules. These functions do not disappear simply because a payment or asset record moves to a blockchain.

Banks could lose some fee pools or customer attention while becoming providers of regulated deposits, identity, custody, credit and tokenised settlement. Some may build digital channels; others may partner with fintechs; some may become infrastructure providers behind third-party interfaces. Outcomes depend on execution, regulation, trust, cost and risk management—not technology alone.

9 | The customer: convenience versus control

Digital finance can reduce friction, broaden access and make transactions easier to trace. But customers may face phishing, fake apps, social engineering, account takeover, confusing terms, opaque data sharing and transfers that are difficult to reverse. Crypto users may additionally face custody, private-key and exchange risks. Customers should know which institution holds their funds and who is accountable when something goes wrong.

Privacy is not a binary choice between total anonymity and total surveillance. Systems create different data trails and access rules. The questions include what data is collected, who can access it, how long it is retained, when it can be shared and what recourse customers have. Offline payments, programmability and digital identity also need safeguards so convenience does not become arbitrary restriction.

10 | Who earns, who pays and who bears the risk?

Participant	Potential value	Key exposure	Evidence to test
Banks	Deposits, lending, custody, settlement	Disintermediation, cyber risk, margin pressure	Fee pools, deposit behaviour, digital costs
Fintechs/apps	Distribution, engagement, merchant tools	Regulatory change, fraud, acquisition cost	Active users, unit economics, complaints
Crypto firms	Trading, custody, issuance, network services	Volatility, insolvency, cyber/legal risk	Reserves, liquidity, redemptions
Merchants	Faster collection, reconciliation	Fraud, downtime, cost, disputes	Acceptance cost, settlement time, failures
Customers	Convenience, access, speed, choice	Scams, privacy loss, errors, volatility	Complaint outcomes, loss rates, usability
Authorities	Efficiency, traceability, policy options	Stability, exclusion, surveillance concerns	Resilience, inclusion, governance

11 | What the evidence must prove before declaring a winner

1.       Does a new instrument solve a real customer or market problem better than existing systems after fees and risks?

2.       Are customers and merchants using it repeatedly, or are pilot participation and sign-ups being mistaken for adoption?

3.       Who legally owes the holder the money, and what happens in insolvency?

4.       Can the asset be redeemed at par, under what conditions and with what delay?

5.       What happens when a transaction is mistaken, fraudulent, sanctioned or disputed?

6.       Do efficiency gains reach customers, or are they captured by intermediaries and infrastructure providers?

7.       Can the system scale across borders without creating new fragmentation, cyber concentration or regulatory gaps?

8.       What independent data show costs, failures, fraud, settlement times and customer outcomes?

12 | The likely future: coexistence, competition and new infrastructure

The evidence supports neither the claim that banks will disappear nor that new digital instruments are irrelevant. Plausible scenarios include coexistence: cash remains useful for some users and situations; bank deposits continue to anchor everyday finance and credit; instant-payment rails remain important; CBDCs are tested for specific roles; crypto assets remain a distinct and risky class; stablecoins operate where legal and economic conditions permit; and tokenisation develops in selected institutional markets.

The biggest structural change may occur behind the customer screen—in settlement, collateral, cross-border transfers and the way assets are issued and serviced. If tokenisation becomes useful at scale, banks may remain important but their technology, partnerships and operating models could change. Consumer benefit will depend on competition, interoperability, accountability and effective supervision.

Conclusion | The future belongs to trusted systems, not merely clever tokens

Money's digital future will not be determined by technology alone. It will be shaped by institutions that provide trust, rules that define claims and losses, infrastructure that settles obligations, and customers who decide what is useful enough to adopt. The most consequential contest is over the architecture beneath the transaction: who controls access, data, settlement, credit and recourse.

The forensic question for Biz Masala is simple: as money becomes programmable and digital, will the customer gain more control—or will control shift to a new set of intermediaries?

Source register and editorial discipline

·       Reserve Bank of India, Digital Rupee (e₹) FAQs, 9 January 2025 — https://www.rbi.org.in/scripts/FAQView.aspx/upload/FAQView.aspx?Id=169

·       Reserve Bank of India, Annual Report 2024–25 — https://www.rbi.org.in/scripts/AnnualReportPublications.aspx?Id=1436

·       Bank for International Settlements, tokenised unified ledger, 24 June 2025 — https://www.bis.org/media-releases/20250624-next-generation-monetary-and-financial-system-takes-shape-based-tokenised-unified-ledger-bis

·       Bank for International Settlements, Annual Economic Report 2026, 'Anchoring trust in money' — https://www.bis.org/publications/aer-2026/anchoring-trust-money

·       Income Tax Department, TDS on transfer of virtual digital assets — https://www.incometaxindia.gov.in/w/tds-on-payment-for-the-transfer-of-virtual-digital-assets-vdas-

Editorial note: This is public-interest analysis, not investment or legal advice. Policy and tax details can change; verify current rules before publication. Illustrations and diagrams are original explanatory artwork, not official RBI designs, photographs or quantitative datasets. Claims about adoption, market shares, fraud and economics require current independently verifiable data before numerical conclusions are added.