The Reserve Bank of India has launched India’s first Digital Rupee on November 1 for the wholesale segment. The RBI central bank issues currency notes in the form of the digital rupee (e), often referred to as Central Bank Digital Currency (CBDC). It is essentially identical to banknotes, but because it is digital, it is probably simpler, quicker, and less expensive. It also offers all the advantages for transactions that other digital payment systems do.
For the wholesale pilot project for the digital rupee, the RBI has chosen nine banks to take part. These include the Union Bank of India, State Bank of India, Bank of Baroda, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and HSBC.
Difference between Digital rupee and cryptocurrency
Since the digital rupee is not a physical good or virtual asset, unlike cryptocurrencies, there can be no direct comparison between the CBDC (Central Bank Digital Currency) and them. Cryptocurrency coins are also not quite money.
Similar to the paper banknotes that central banks like the RBI issue, this digital rupee can be converted into cash. The CBDC, which will perform the same function as banknotes but is not a decentralised asset like cryptocurrencies, will continue to be issued by the RBI.
A country's fiat currency is known as its central bank digital currency (CBDC), whereas cryptocurrencies are an alternative payment method with their own proprietary algorithm. The crypto currencies are digital assets in a decentralised network, and the digital currencies can be referred to as the nation's digital fiat. The value of a crypto currency, on the other hand, is independent of central banking authorities and follows a transparent process from mining to ownership to transfer of assets, in contrast to digital currencies, which are completely regulated by the central bank and the government, who set the currency's value.
Objective of launching Digital Rupee
India's advancement in the battle for virtual currencies is the main goal of the Reserve Bank of India's (RBI) pilot project on digital currency. This is also due to the rising popularity of cryptocurrencies.
According to Rachit Chawla, the introduction would surely alter the playing field because the digital rupee will increase efficiency and transparency due to the use of blockchain technology. Blockchain will also enable ledger maintenance and real-time tracking.
Customers will have continuous access to the payment system, whether they are wholesale or retail. Direct payments from Indian customers reduce transaction costs and enable real-time account settlements. Additionally, employing a digital rupee will expedite international trade and remove the requirement for opening a bank account.
