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Home » What is Digital Rupee & how does it work, will it compete with Cryptocurrency?

What is Digital Rupee & how does it work, will it compete with Cryptocurrency?

What is Digital Rupee & how does it work, will it compete with Cryptocurrency

India’s first Central Bank Digital Currency (CBDC) or Digital Rupee pilot project started on 1st November. The Reserve Bank of India (RBI) has launched a pilot project for Digital Rupee keeping in mind the wholesale segment. Nine banks have been identified to participate in the pilot project of the wholesale segment. These include the State Bank of India, Bank of Baroda, Union Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and HSBC Bank.

RBI says that many countries are interested in digital currency. However, only a few countries have managed to move past the pilot phase of developing their own digital currency. Finance Minister Nirmala Sitharaman announced the introduction of digital currency in her budget speech in February.

What is Digital Rupee?

The Reserve Bank of India states that a CBDC is a fiat currency issued in a digital form by a central bank. According to the RBI website, “It is similar to paper currency and can be replaced with paper currency, only it differs in form. Simply put, Digital Currency (CBDC) or Digital Rupee are currency notes issued in digital form by RBI.

There will be two types of digital currency in India. Retail CBDC (CBDC-R) and Wholesale CBDC (CBDC-W). While retail CBDCs will be available for everyone to use, wholesale CBDCs will be available to select financial institutions.

Benefits of digital rupee

CBDC is more secure than traditional digital transactions, as it is based on blockchain which is very difficult to break. The use of CBDC can bring further changes in the cashless economy. The use of CBDC will promote cashless payments and bring about a positive change in the banking landscape. There are many other benefits of the Digital Rupee.

  • CBDC will provide more robust, efficient, reliable, regulated and legitimate payment options.
  • There will be less dependence on cash.
  • You will reduce the need to carry cash with you.
  • People can keep digital currency in their mobile wallets.
  • Digital rupees can be easily converted into bank money and cash as well.
  • Transaction costs will be less.
  • The government will have access to all transactions that take place within the authorized network.
  • There will be more control over the money going into and out of the country.
  • The problem of counterfeit notes will be solved.
  • The cost of printing paper notes will be saved.
  • The digital currency will be there forever once it is released and it will never go bad.

Difference Between Cryptocurrency and Digital Rupee

There is a big difference between cryptocurrency and central bank digital currency. Cryptocurrency is a completely private currency, it is not a legal tender and is not monitored by any government, nor is it controlled by any government or central bank. Digital currency is fully regulated. It is a government-approved and fully government-backed legal tender.

The rate of cryptocurrency fluctuates, whereas nothing like this will happen in digital currency. Its effect will be similar to that of cash currency. You will be able to convert digital rupees into cash.

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