The Reserve Bank of India says that CBDC is a legal tender issued by the central bank in digital form. According to the RBI website “It is similar to paper currency and can be exchanged with paper currency. Only its form is different. Simply put, Digital Currency (CBDC) or Digital Rupee are currency notes issued by RBI in digital form. Rupees in electronic form can be used in contactless transactions. There will be two types of digital currency in India. Retail CBDC (CBDC-R) and Wholesale CBDC (CBDC-W). Retail CBDCs will likely be available for use by all, while wholesale CBDCs will be available for use by select financial institutions.
Benefits of Digital Rupee
There will be many benefits of using CBDC. Minister of State for Finance Pankaj Chowdhary told the Lok Sabha last year, “Digital rupee will have many benefits. Not only will this reduce the dependence on cash, but CBDCs will potentially lead to a more robust, efficient, reliable, regulated and a legitimate payment option.” After the introduction of RBI’s digital currency (E-Rupee) in the country, the need to keep cash with you will reduce, or there will be no need to keep it at all. People will be able to keep digital currency in their mobile wallet. It can also be easily converted into bank money and cash.
Greater Monitoring of Transactions
In addition to reducing transaction costs, this digital currency will allow the government to access all transactions within authorized networks. In this way, there will be more control on the money coming in and going out of the country. Apart from this, it will get rid of the problem of fake currency. The cost of printing paper notes will be saved. Digital currency will remain forever after it is issued and it will never deteriorate.
CBDC is more secure than traditional digital transactions, as it is based on blockchain which is very difficult to break into. Payments are faster in blockchain technology. The use of CBDC can further transform the cashless economy. The use of CBDC will lead to cashless payments and bring a positive change in the banking landscape.
Difference between Cryptocurrency and Digital Rupee
The main difference between cryptocurrency and central bank digital currency is that crypto is a completely private currency. It is not legal tender (legal currency) and is not monitored by any government. Nor does any government or central bank have any control over it. Digital currency is fully regulated. It is approved by the government and is a fully legal tender backed by the government. Where there are fluctuations in the rate of cryptocurrency, nothing like this will happen in digital rupee. It will have the same effect as cash currency. You will be able to convert digital rupees into cash.
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