The Digital Blockchain Rupee: Revolutionising India
India's Finance Minister Nirmala Sitharaman announced in her Budget 2022 speech that the Reserve Bank of India (RBI) would be issuing The Central Bank Digital Currency (CBDC) in the upcoming financial year 2022-2023. As the name suggests, the Digital Rupee is a form of electronic money that people can use for contactless transactions.
However, many people seem confused between cryptocurrencies such as Bitcoin and the Digital Rupee. What makes them different? Do they have any similarities? Read on to find out!
Digital rupee vs Crypto
Cryptocurrencies are digital assets that can be bought, sold, or exchanged directly without any intermediary like banks. They are not backed by a government or a central bank and hence are not considered a legal currency by India. These assets are based on blockchain technology and do not hold any intrinsic value.
On the other hand, the Digital Rupee will be equivalent to physical cash, backed and taxed by the finance ministry. It will be a legal tender that people can exchange at par with the currently existing Indian currency.
What we can expect from the Digital Rupee
Similar to Bitcoin, the Digital Rupee will operate using blockchain and other technologies. However, the currency will be centralized--issued by the RBI. It could be on a private blockchain or any other authorized blockchain.
In the latter, Indian banks and other financial organizations will collaborate with RBI to enable transactions through hosting nodes. The Finance Minister also announced that 75 digital banking units would soon be set up in 75 different districts by scheduled commercial banks.
The motive and impact behind digital rupee
One of the main reasons for launching a Digital Rupee is that India doesn't want to miss the opportunity to climb onto the virtual currency bandwagon. The central government has realized that virtual currency is here to stay. So, instead of denying its existence, it has decided to administer one of its own.
Moreover, the Digital Rupee is expected to impact the Indian virtual economy greatly. According to FM Nirmala Sitharaman, the Digital Rupee will be considered a currency in circulation. It will allow the government to print fewer physical notes, curbing counterfeit currency. It also can help the government create a more efficient and affordable currency management system.
Also read - UPI - India's Fintech Innovation for the World