There’s a motif around the world and especially in India about the regulation of Digital Currency for easier, cheaper, and faster transaction. But how beneficial is this new digital form of rupee or currency to India? Let’s check out.
Digital rupee or digital currency is a digital version of the Indian Rupee. The ‘E-rupee,’ ‘e₹ ‘, or ‘CBD’, which stands for ‘Central Bank Digital Currency’, is another name for this.The currency is issued by the Reserve Bank of India (RBI) and the commencement of the pilot project of the same started from November 1, 2022.
The Reserve Bank of India initiated the digital currency regulation with the intention of providing an additional method of payment that is similar to bank notes.The only difference is that the digital money is intended to take place digitally, facilitating usability. Additionally, it offers all the advantages for transactions as is available for other types of digital money. Being a legal tender in a digital form, the digital currency will also be regulated by the Central Bank of India, similar to bank notes. As per RBI, it will be exchangeable at par with current currencies and accepted as payment and a secure place to keep wealth.
Will CBDC replace bank note?
Digital currency is tracked and transferred using online system. As per RBI, the digital currency can serve as a unit of account and a medium for regular transactions and is identical to its physical counterpart in both concept and use. But it’s not cash. Though slowly and gradually, people could head towards using digital currency due to its easy, fast and cheap features, RBI will not replace physical or bank notes with these new digital currencies. RBI wants digital currency with little or no disruption to bank notes.
Digital currency vs Cryptocurrency
Many people wonder when there’s cryptocurrency then why digital money? But there’s a huge difference between these two kinds of money. The electronic equivalent of fiat currency, known as digital currencies, allow for contactless exchanges between parties, such as sending money electronically from one’s bank account to another. Digital currency is used in every online transaction; once you withdraw money from a bank or ATM, that digital currency is converted into usable cash. However, we can’t transfer cryptocurrency into a usable cash.
Cryptocurrencies, also known as digitally encrypted coins/virtual coins, are a type of strong encrypted store of value. All these digital coins were developed privately by individual owners using cutting-edge blockchain technology, and most nations have not yet regulated them. On the other hand, digital currencies don’t come with blockchain-based encryption. Users should secure their banking apps and digital wallets with strong passwords and biometric verification whenever possible to reduce the risk of theft and hacking. The same holds true for debit and credit cards, which are essential for all the transactions using digital currency.
Digital currency transactions are governed by a central authority, the RBI in India, which also oversees the use of liquid cash and other traditional forms of payment. Hence, it is a centralised currency. Cryptocurrencies operate under a decentralised structure that is not overseen by a single entity. However, a decentralised ledger that is open to everyone records every cryptographic transaction.
According to RBI, cryptocurrencies are not considered as valid currencies because a central bank or government must issue every kind of money today and hence issuing of digital rupee was must. On the other hand, digital rupee is India’s accepted version of digital currency.
How Digital Currency is profitable for the people?
Digital currency will allow us to make efficient transfer of money. Further, it enables low transaction costs, faster settlement of funds, lesser downtime, and smooth and soft cross-border transactions. On business part, digital money has the potential to change how we shop, save, and conduct business in ways that we likely do not even completely comprehend now, as well as increase financial inclusion and expand international trade. According to a recent press release from RBI, ‘Digital Currencies like Digital Rupee enables enables two entities to carry out money transactions without the involvement of the bank.’ Like the physical notes, however, India is regulating its digital rupee to bring it under the tax purview. People who are looking to carry out transactions beyond a certain amount would have to disclose their identity, similar to the norm followed in physical cash transaction.
India, being the pioneer for national digital currency, will be keenly observed across the globe for the creation, distribution and retail usage of the national digital currency. RBI is currently testing the anonymity, security and privacy related to the new digital currency.
Conclusion
Cash placement and tracking are difficult in India. CBDC can address anonymity, find a non-threatening solution, and lessen the need for cash. The government will reduce operational, printing, distribution, and storage expenses, advancing its goal of a cashless society. Initiating digital currency will make India move forward in the race of virtual currency.
Blog article by Tasleem Majumder
