What exactly is Digital Rupee?

A “legal tender” issued in digital form by a central bank, according to the Reserve Bank of India, is CBDC.

It is comparable to fiat money and may be exchanged “one for one” for fiat money. This “Digital Rupee,” also known as the “e-Rupee,” will function as a national currency and be in accordance with the country’s central regulators.

What is The Central Bank Digital Currency (CBDC)

CBDCs are digital forms of currency backed by the government that use blockchain technology to analyze and compile transaction data.

According to the Reserve Bank of India, Central Bank Digital Currency (CBDC) is a digital representation of legal money that is controlled by a central bank.

Who will establish the CBDC and why is it necessary?

In the 2019 fiscal year, India’s central bank, RBI, will introduce the CBDC (FY23). It will be introduced by the government and supported by blockchain technology. The ultimate objective is to provide consumers both the ease and security of digital technology and the rules of conventional banking.

Five countries have introduced and are using digital currency. The Bahamian Sand Dollar was the first CBDC that was readily accessible. The efforts being made throughout the world are highly active, and we can anticipate that they will only pick up speed shortly.

Advantages Of The Digital Rupee

The benefits of CBDC are comparable to those of cryptocurrencies and other electronic forms of payment.

The digital currency would also need to be accepted by all individuals, businesses, and governmental organizations as a form of payment, legal tender, and secure reserve of value.

What was the purpose of the launch of Digital Rupee?

India’s advancement in the battle for virtual currencies is the Reserve Bank of India’s (RBI) primary goal in creating the digital currency pilot project. Additionally, this is due to the rising popularity of cryptocurrencies.

The introduction would surely alter the playing field since the digital rupee will increase efficiency and transparency due to the usage of blockchain technology. Additionally, blockchain will enable ledger maintenance and real-time tracking.

Customers will always have access to the payment system, whether they are wholesale or retail. Direct payments from Indian clients reduce transaction costs and allow for real-time account settlements.

How does the digital rupee differ from Cryptocurrencies?

The Central Bank Digital Currency (CBDC) cannot be directly compared to cryptocurrencies since, in contrast to them, the digital rupee is neither a physical good or virtual asset. Cryptocurrency coins are also not quite money.

The equal of the physical banknotes that are printed by central banks like the RBI, this digital rupee may be converted into cash. The CBDC, a currency that the RBI will continue to print and which will perform the same function as banknotes but is not a decentralized asset like cryptocurrencies, will be issued. Utilizing a digital rupee will also hasten cross-border transactions and remove the requirement for opening a bank account.

Along with lowering transaction costs and enabling real-time account settlements, this will facilitate direct payments from Indian consumers. The introduction of a digital rupee will hasten international trade and do away with the need to create a bank account.

What is the general public’s impact on this?

A official statement by the RBI will describe the entire procedure and make things clearer, despite the fact that several models of how the digital rupee would function have been put out by technological experts. When compared to conventional digital transacting experiences, digital rupee transactions are intended to be quick.

Will it take the place of the standard rupee?

No. The digital rupee will be counted as an extra legal currency in circulation. It will also reduce counterfeit currency and establish a more efficient and cost-effective cash management system. The digital rupee will not require a bank middleman for internet transactions and will rely on blockchain technology, with the RBI acting as the guarantee.

Bridging the Gap with the Digital Rupee

CBDCs and the digital rupee have enormous promise for the Indian economy. CBDC, a new payment method, will soon be available in a number of nations throughout the world. It is expected to restore financial stability to the economy and to be utilized as a new type of money.

Why has RBI implemented CBDC?

CBDC is intended to provide consumers an extra payment option, not to replace the present payment systems. It is not intended to replace current forms of currency.

The RBI is certain that the introduction of the digital rupee will “boost India’s digital economy, expand financial inclusion, and improve the efficiency of the monetary and payment systems. RBI offered the following justifications for India to think about issuing CBDC:

Features of Digital Rupee 

1. CBDC is a sovereign currency issued by central banks in alignment with their monetary policy. 

2. It appears as a liability on the central bank’s balance sheet. 

3. It must be accepted as a medium of payment, legal tender, and a safe store of value by all citizens, enterprises, and government agencies. 

4. CBDC is freely convertible against commercial bank money and cash.

5. CBDC is a fungible legal tender for which holders need not have a bank account. 

6. CBDC is expected to lower the cost of issuance of money and transactions.

How is digital rupee different from money in digital form? 

Explaining the difference between CBDC and money in digital form, RBI said, “A CBDC would differ from existing digital money available to the public because a CBDC would be a liability of the Reserve Bank, and not of a commercial bank.”

CBDC can be classified into two types

1) Retail (CBDC-R): Retail CBDC would be potentially available for use by all

2) Wholesale (CBDC-W) is designed for restricted access to select financial institutions.

Digital rupee vs cryptocurrency

CBDC will have all of the advantages that we see with cryptocurrencies and digital forms of payment. To begin with, a digital currency can never be torn, burned, or physically damaged. They are also not physically lost. In comparison to notes, the lifeline of a digital form of currency will thus be infinite.

Difference between Digital Rupee and Cryptocurrency

An exchange medium and decentralized digital asset based on blockchain technology are known as cryptocurrencies. However, it has generated controversy because of its decentralized character, which refers to its functioning without the need of any middlemen like banks, financial organizations, or central governments. On the other hand, RBI-issued Central Bank Digital Currency (CBDC) will function as legal currency in digital form.

Being supported by the government would set the digital rupee apart from Bitcoin, Ethereum, and other cryptocurrencies. Second, the digital rupee will have an intrinsic worth due to government support, making it comparable to possessing a real rupee counterpart.

Benefits of digital rupee

A digitized currency would not only lower transaction costs but also make it simpler for governments to access all transactions taking place inside approved networks. It will be difficult to escape the government’s scrutiny, making every transaction subject to the applicable domestic laws. As a result, the government will have more control over how money leaves and enters the nation, giving them the opportunity to establish a space for better budgeting, future economic plans, and a climate that is generally much safer.

According to a statement made by the RBI earlier this month, the RBI has been weighing the advantages and disadvantages of a CBDC for some time and is preparing an implementation plan that will be phased in.

Leave a Reply

Your email address will not be published.