A digital version of currency notes produced by a central bank is known as a Central Bank Digital Currency (CBDC).
Indian digital rupee (e₹) promoted by RBI has arrived and will be used for issuing virtual currency for transactions in government securities. It is substantially not different from banknotes, but being digital, it is likely to be easier, faster, and cheaper. It also has all the transactional benefits of other forms of digital money. A sort of electronic money that can be used in contactless transactions is a digital currency or rupee.
Many a time, we tend to confuse cryptocurrency with Digital currency. A decentralized digital asset and medium of exchange based on blockchain technology actually is known as crypto currency. It has, however, generated controversy because of its decentralized character, which refers to its operation without any middlemen like banks, financial organizations, or central governments.
On the other hand, RBI issued Central Bank Digital Currency (CBDC) would be accepted as legal cash online. Digital Rupee will provide an additional option to the currently available forms of money, without any risks associated with private cryptocurrencies. These currencies will also ensure consumer protection “by avoiding damaging social & economic consequences of private virtual currencies.”
Salient features of Digital Rupee
- It will be the digital token of our country.
- It will make business transactions easy & speedy.
- Money transfers from smartphones will be quick, transparent and hassle-free.
- It will get rid of fake currency.
- It will save cost of printing paper notes .
- It will be there only after it’s issued.
- It cannot be tampered.
It will not only lower transaction costs but also make it simpler for governments to access all transactions taking place within authorized networks.
With minimal disruption to the financial system, it will counter perceived threats posed by cryptocurrency. It will be hard to escape the government’s scrutiny, making every transaction subject to the applicable domestic laws. As a result, the government will have better control over how money enters and departs the nation, providing opportunities for improved budgeting, future economic plans besides all-round safe
In an earlier statement, RBI said, the use of digital the rupee is expected to make inter-bank markets more
efficient, as it will reduce transaction costs by pre- empting need for settlement guarantee infrastructure
or for any collateral to mitigate settlement risk.
Nine banks have been identified for participation in this pilot project by RBI viz. State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First and HSBC.
The launch is being carried out in two phases. In the pilot phase, digital rupee is being launched for wholesale transactions– Central Bank Digital Currency Wholesale, to be used for large amounts of transactions and Central Bank Digital Currency Wholesale to be used by large financial institutions.
While in the second phase, Central Bank Digital Currency Retail will be used for retail. including banks, large non-banking finance companies and other big transaction institutions.
” Digital Rupee “ is anticipated to give an extra payment pathway to consumers, without replacing present payment systems. It aims at complementing, rather than replacing, current forms of money. Let’s shed doubts and welcome Digital Rupee as a game changer.