The RBI launched the official digital currency of India in 2022-23, and central banks tread it with caution. This haste belief countered private cryptocurrency’s increased popularity.
What is Digital Currency by Central Bank?
A CBDC (central bank digital currency) in the form of legal tender that is issued by the central bank in a computerized or digital form. Digital currency is identical to the fiat currency that can be exchangeable in it but different in form. Globally, the central bank explores digital currency for some reasons that is ranging from seeking to popularize this electronic currency, to countering the rise of digital assets like cryptocurrency. A survey in 2021 done by the (BIS) Bank for International Settlements, found that about 86% of central banks are actively researching the potential for CBDC, 60% experimenting along with the technology, 14% are deploying projects of the pilot.
How Digital Payments Are Different from Other Payments?
The basic difference between different digital payments and CBDCs is that the former payments are final and reduce the risk of settlement in the financial system. Essentially, it is equivalent to digital purchasing of goods and services used by cash, and there is no requirement for the settlement of inter-banks. Transactions done using CBDC would allow the system of real-time payments. As RBI points out, an Indian importer pays its American exporter on a real-time basis in dollars, without intermediary need and the transaction would be final.
Will Digital Rupee be Useful in India?
According to Rabi Sankar from RBI, the CBDC is to replace the usage of cash because of the discomfort with different modes of digital payment. Yet, one can be redirected to acceptance of CBDC, who prefer the cash for anonymity, as long as it is assured. It may be useful for those excluded from the home-grown payments system of India. The user interface of the unified payment owing to the lack of debit cards is the requirement to transact on the digital platform.