Tech

RBI Begins Testing Digital Rupee: How It Is Different From Cryptocurrencies and Other Details


Reserve Bank of India (RBI) released a concept note on the Central Bank Digital currency (CBDC) to raise awareness of it and explain its goals, benefits, Technology, and also the risks involved. The country’s peak bank also said that it will soon start a pilot program for specific use cases and give an idea of ​​what one can expect from the Digital Rupee. The Digital Rupees will to some extent mimic the characteristics of hard money (banknotes and coins). In this article, we list all the important things to know about CBDC.
What is CBDC or Digital Rupee?
CBDCs or Digital Rupees are quite similar to existing fiat currencies (paper money and coins) and can be legally used for transactions. However, unlike paper money, the digital Rupee cannot be touched. In addition, you do not need a bank account and the Digital Rupee can be stored in the digital wallet.
Difference between CBDC and digital payment?
Since canceling ads in 2016, the reach of digital payments has increased. Currently, payments can be made through UPI, NEFT and RTGS. However, in these payment methods, there is an intermediary bank through which the payment is verified and facilitated.
The RBI concept note states that the main difference between CBDCs and money in digital form/digital payments is liability. CBDC will be the obligation of the Reserve Bank and not of a commercial bank. This means that all transactions will be done through the central bank.
How is CBDC different from cryptocurrency?
There are many differences between CBDCs and cryptocurrencies. Cryptocurrency is ‘private’ by nature and it is not regulated by any country, any bank or developers. On the other hand, CBDCs can be regulated and controlled by the central bank.
Unlike CBDCs, cryptocurrency is also volatile, meaning its value can change rapidly on the basis of demand (market interest in buying them) and supply (the amount available). to buy). Third, there is no need to mine it, so there are no environmental concerns associated with the Digital Rupee.
However, it should be noted that both CBDCs and cryptocurrencies depend on some form of technology.
Benefits of CBDC or Digital Rupee?
According to RBI, CBDC will complement and not replace existing forms of monetization and existing payment systems. It said that the Digital Rupee will “boost India’s digital economy, increase financial inclusion and make the monetary and payment system more efficient.”
Other benefits of CBDC include reducing costs associated with printing and managing physical cash, promoting a cashless economy, and supporting innovation in payments. There will be real-time transactions without any intermediary banks and payments can also be easily made in other countries.
Risks associated with CBDC
Since CBDCs and transactions will involve some kind of digital technology, there is a risk of being hacked. RBI will be responsible for ensuring the safety and security of the system. In addition, there will be a risk to the privacy of CBDC users. It takes quite a bit of time and effort to start and maintain an entire payment system.

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