Last month, Reserve Bank of India(RBI) announced the launch of Digital Rupee(ea1) for specific uses. The pilot launch and the digital currency roll on began on Tuesday, i.e. November 1.But what exactly is this Digital Currency or Digital Rupee? Lets take a look.
Digital currency or Rupee is an electronic form of the paper currency that can be used in contactless transactions. This is issued currently by Central Bank and is also called Central Bank Digital currency(CBDC). This is far different from the cryptocurrencies which are decentralized with no intermediary influences like banks or financial blocks. While CBDC is designed in a legal format.
This CBDC is of two types :
- Retail (CBDC-R):This is potentially designed for everyone’s use.
- Wholesale(CBDC-W):This is a restricted format with a given access to selected financial institutions.
So why is RBI opting for Digital Rupee while the nation is monetarily Digitized?
Well, Digital Currency has been designed aiming to complement the paper form of money which we currently use. Hence it is not a replacement but just a complementary to the currency currently in use.
Coming to the benefits of Digital Rupee:
- Lessens the transaction costs
- More easier to access the transactions happening within an authorized networks.
- Better control on fraudulent transactions
- Less physical damage of currencies
- Lasts a life time than physical note.
- More efficient for inter bank marketing.
As of now our own CBDC is launched as a pilot project with support of 9 banks which are State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and HSBC. According to the sources the CBDC-R, i.e. the retail end will be released in a month from the pilot launch.
This Digital Rupee is backed by block chain technology and the exchange of currencies will happen through block chain based wallets. And yes, it is also exchangeable with the Government-issued money.
How far is this going to take the finances of India up, time has to tell.
For further information, stay tuned to us !
reference: TOI