RBI can introduce the digital rupee this year as stated in the budget 2022-2023. India is a country that is expanding economically and we need to enter into new innovations to keep up with the world. Digital currency is only accessible with computers and mobile phones, they only exist in electronic form which does not require any intermediaries and is one of the cheapest modes of trading currencies. All cryptocurrencies are virtual currencies, but not all digital currencies are cryptocurrencies. Cryptocurrencies are those currencies that work in an encrypted format through blockchain technology for secure transactions but digital currency might not need to be encrypted.
About Central Bank Digital Currency (CBDC)
CBDC is a virtual currency issued by RBI as it is a legal tender that is it is acceptable throughout India. It is the same as fiat currency. Fiat money is a government-issued currency that is backed by the administration and not the physical commodities like gold and silver but as its value is backed by the administration so it is valid in the entire country. It is exchangeable with the other fiat currency. Digital fiat currency or CBDC can be transacted using wallets backed by blockchain technology.
What is the need?
Digital currency is very useful in today’s world as it is more convenient and secure in digital forms, it mitigates the risk of losses that Indian depositors face, also the safer alternative to bank deposits, and most importantly for Indians working abroad, sending money home will become simpler and cheaper.
Not only India many other countries of the world are shifting toward digital currency such as China has e-Yuan, and South Korea, England, and Sweden have e-Krona. In 16 countries such currencies are in the development phase and 32 countries are in the research phase- USA, UK, and Mexico. Nigeria, The Bahamas, and 7 other different countries in the Eastern Caribbean Union have already launched a centrally governed digital currency. Russia is also planning to launch digital rubble soon.
- If there are so many benefits then it is sure to have some challenges too. like weaker banks may struggle to retain low-cost deposits that are those banks that require cash to maintain their infrastructure might suffer but only for a short period of time.
- It can upgrade hacking.
- Less anonymity.
- Central Bank has complete control over it so there might be less privacy for the users.
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