The introduction of the e-Rupee, India’s proposed Central Bank Digital Currency (CBDC) issued by the Reserve Bank of India (RBI), represents a significant milestone in the evolution of sovereign digital money. As economies across the world increasingly move toward digital financial systems, CBDCs have emerged as a state-backed alternative to private cryptocurrencies and existing electronic payment mechanisms. This paper examines the legal, constitutional, and regulatory implications surrounding the implementation of the e-Rupee within India’s existing financial and legal framework. The study adopts a doctrinal and comparative research methodology. It analyses statutory provisions governing currency issuance, payment systems, and data protection in India while also evaluating international CBDC experiences, particularly those of the Bahamas (Sand Dollar), Nigeria (eNaira), and China (e-CNY). Through this analysis, the paper identifies key legal challenges associated with the e-Rupee, including the absence of explicit statutory recognition under the Reserve Bank of India Act, 1934, questions relating to legal tender status, privacy concerns arising from transaction traceability, and potential regulatory gaps in payment system governance. The research further evaluates India’s digital infrastructure readiness, considering the role of the Unified Payments Interface (UPI), the Jan Dhan–Aadhaar–Mobile (JAM) ecosystem, and the challenges of cybersecurity and digital inclusion. Lessons drawn from global CBDC implementations highlight the importance of strong privacy safeguards, offline payment functionality, public adoption strategies, and regulatory clarity. The paper ultimately argues that the successful implementation of the e-Rupee requires targeted legislative reforms, robust data protection safeguards, and a carefully designed regulatory framework that balances technological innovation with constitutional protections. By addressing these legal and infrastructural considerations, India can develop a CBDC system that promotes financial inclusion, strengthens monetary sovereignty, and maintains public trust in the evolving digital economy.