The money will be in virtual form just like other cryptocurrencies but the digital rupee will not be decentralised, it will be regulated by the Reserve Bank of India (RBI). The digital rupee will be completely legal and acceptable to the Indian Government.
The launch is being carried out in two phases. This is the first pilot phase where the digital rupee has been launched for wholesale transactions i.e. for large transactions.
What is digital rupee?
Digital rupee, also known as Central Bank Digital Currency (CBDC), is a digital form of currency notes issued by a central bank. It is substantially not different from banknotes, but being digital it is likely to be easier, faster and cheaper. It also has all the transactional benefits of other forms of digital money.
Where will it be applicable?
Digital Rupee will be used for large payments and settlements. According to the RBI, it will be used as the settlement amount on the purchase and sale of government securities i.e. government bonds. The Reserve Bank has also said that it will also be used for retail transactions soon.
How does it work?
Similar to checking the bank balance, one can check the balance in the wallet. CBDC will be based on blockchain technology. Individuals will be able to pay it to whomever they want to pay and it will reach their account.
CBDCs are of two types– Central Bank Digital Currency Wholesale, which is used for large amounts of transactions and in the second phase, Central Bank Digital Currency Retail will be used for retail.
Central Bank Digital Currency Wholesale will be used by large financial institutions, including banks, large non-banking finance companies and other big transaction institutions.
Central Bank Digital Currency Retail can be used by people for everyday transactions. This will start at select locations and banks first. People of all age groups will be included in the retail project. Then based on their experiences, the features will be changed if needed.
Features of Digital Rupee
-CBDC will be the digital token of the country.
- It will make business transactions easy.
- Money transfers from smartphones will be quick and hassle-free.
- Digital Rupee will help get rid of the problem of fake currency.
- The cost of printing paper notes will be saved.
- Digital currency will always be there after it is issued.
- CBDC cannot be damaged.
