The Reserve Bank of India (RBI) today announced the launch of the first pilot for a digital rupee on 1 December. With the launch, India joins a handful of countries to launch their own blockchain currency which could undercut India’s pre-eminence. digital finance. To give some perspective, the United States has yet to launch its Central Bank Digital Currency (CBDC).
One of the most common questions asked is how similar will the digital rupee be to cryptocurrency. Well, the similarities between CBDCs and cryptocurrencies end at the fact that they both have blockchain as their underlying technology. Therefore, with blockchain as a foundation, all transactions can be tracked on a ledger with no ability to modify the past – leading to transparency and easier bookkeeping. Hence, the CBDC will be a technology-based currency of the RBI with control over the supply as well as the use side. It will not be decentralized like cryptocurrencies.
A major difference between the two is that there is no regulator for cryptocurrencies, while digital rupee is a legal tender with the RBI as its regulator. Transactions here can be a bit more anonymous than other digital transactions, as money moves from wallet to wallet after a one-time deduction from a bank account, but they can still be tracked with the Reserve Bank of India as the regulator. can be done.
“Since the CBDC will be issued by the Central Bank like a digital form of currency notes and distributed by the banks (Distribution Nodes), the underlying technology (Blockchain like Tech Stack) will record and maintain traces of the transactions, The way it is done in the core system of banks.. In case of CBDC transactions the issuance marks will be available within CBDC nodes, as the distribution of CBDC will be done only by REs, it will be offered to Keyseed users in some cases , who could be non-keyed users,” says Vishwas Patel, director, Infibeam Avenues Ltd. and chairman, Payments Council of India.
“It is currency in the form of digital tokens on the blockchain,” says Patel. With a retail CBDC, you should be able to transact (like physical cash) without involving any banks. It will have the same denominations as physical cash. It Quite different from UPI which is an actual debit from your bank account. CBDC is a currency, a legal tender guaranteed by the RBI.”
Also, unlike cryptocurrencies, you will be able to pay and transact with digital rupees through digital wallets offered by participating banks and stored on mobile phones. “With a successful pilot and expansion, the full rollout of the digital rupee is expected to boost payments access and financial needs of a wider range of users while ensuring transparency and lower operational costs, and in this regard, to see Encouraging is the RBI’s support for innovation in creating a world-class, future-ready digital ecosystem,” says Jaya Vaidyanathan, CEO of BCT Digital.
Lastly, Digital Rupee is the electronic form of cash, which will be used to buy and sell goods and services. Unlike crypto you cannot treat it as an asset class and invest in it.
Read also: Digital Rupee pilot today: Features, where and how it will be launched; All you need to know
