When discussing digital currency, you might think of one or two well-known varieties. There is the digital representation of currency that you access with mobile and online banking services. This currency is the liability of a commercial bank. There is also cryptocurrency, a digital medium of exchange issued by private organizations. Cryptocurrency ownership and transaction records are stored on encrypted public ledgers.
However, it may not be long until a third variety of digital currency becomes just as well-known. This would be central bank digital currency, or CBDC. India has rolled out a CBDC pilot program, making it one of several nations to do so. In this article, we’ll explain what CBDC is and what its implications are for the public and private sectors.
CBDC is a form of virtual money backed by a central bank rather than commercial banks. This means that a central bank such as the Federal Reserve System of the USA or the Reserve Bank of India (RBI) would back CBDC as a liability. India’s CBDC is also referred to as e-rupee.
The e₹-R will take the form of digital tokens to be transacted through digital wallets on mobile phones. It is expected to share the same denominations as paper currency and coins, as well as their degree of anonymity. According to the RBI, all of the laws that apply to currency will apply to CBDC. The Economic Times reported that this is being made possible thanks to an amendment to the RBI Act.
Some consumers may wonder what the difference is between e-rupee and the unified payments interface (UPI) QR. In short, UPI transactions involve the consumer’s bank account balance, while e-rupee are transacted from a wallet.
