The Reserve Bank on Tuesday said it will launch the first pilot for retail digital rupee (e₹-R) on December 1, 2022, in which four banks including SBI and ICICI Bank will initially participate.
On November 1, the RBI had launched the first pilot in the digital rupee – wholesale segment. Announcing the operationalisation of Central Bank Digital Currency Retail (e₹-R) Pilot, the RBI said the pilot would cover select locations in closed user group (CUG) comprising participating customers and merchants.
So, what is CBDC or India’s digital rupee?
The RBI defines it as digital legal tender. The digital rupee will be exchangeable at par with existing currencies and will be accepted for payments as well as a safe store of value, explains a
Cryptocurrency is decentralised money that is not bound by the chains of any government or central bank. It is based on blockchain technology and employs cryptography to secure human transactions, making them impossible to forge.
However, in August 2010, a hacker discovered a flaw in the Bitcoin protocol. By performing multiple transactions before logging them into the blockchain, the hacker exploited the vulnerability and generated an infinite amount of Bitcoins.
How is
In its note on the digital currency, the RBI had said, “a CBDC is a legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different.”
“Unlike cryptocurrencies, a CBDC isn’t a commodity or claims on commodities or digital assets. Cryptocurrencies have no issuer. They are not money (certainly not currency) as the word has come to be understood historically,” said the announcement made by RBI.
The CBDC is a digital representation of paper currency issued by central banks such as the RBI, and it should be exchangeable for cash. The widely known digital rupee is a currency issued by the RBI, and the digital rupee will serve the same purpose, but it will not be a decentralised asset like cryptocurrencies. The digital rupee will be a currency issued by central banks who will be in charge of governing and managing the asset.
The digital rupee will be legal tender, which means it can be used to purchase goods and services. Digital rupees include things like digital wallets, NEFT, and IMPS. As a result, when the RBI begins to circulate the digital rupee, all Indian citizens will be able to use it.
Reasons RBI Listed for Starting CBCD
According to its note, this is why the government has started CBCD:
- Reduction in cost associated with physical cash management.
- To further the cause of digitisation to achieve a less cash economy.
- Supporting competition, efficiency, and innovation in payments.
- To explore the use of CBDC for improvement in cross-border transactions.
- Support financial inclusion.
- Safeguard the trust of the common man in the national currency vis-à-vis proliferation of crypto assets.
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Source: News18