Digital currency is any currency, money or a money-like asset. It manages stores or exchanges on digital computer systems. There are various types of digital currencies such as cryptocurrency, virtual currency and the central bank’s digital currency.
In India, the Reserve Bank of India is planning to introduce digital currency. It is going to be a great initiative. To learn more about the digital currency in India let’s step into the details.
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Introduction of Digital Currency in India
The Reserve Bank of India (RBI) is going to launch the Central Bank Digital Currency (CBDC) in the financial year 2023. Finance Minister, Nirmala Sitharaman in her budget of February announced about it in her speech.
She said digital currency is introducing to boost the country’s digital economy. The currency will lead to a more efficient and cheaper management system. Digital Rupee is based on the blockchain technology and RBI will launch other digital assets.
What is Digital Rupee?
Rupee is the currency of India that RBI issues and digital rupee will have the similar functions. However, the currency won’t be a decentralised asset like the cryptocurrencies.
Central bank will issue the digital currency in india and this is the one that manages and governs the digital assets
Indian digital currency/rupee is going to be the legal tender. Thus, traders can use it to buy whatever they want. Examples of digital currencies are NEFT and IMPS. Once RBI starts circulating the digital rupee all Indians can use it.
Central Bank Digital Currency (CBDC)
Central Bank Digital Currency is the legal tender issue by the RBI in digital format. The currency is similar to fiat currency and can be exchanged with fiat currency. But the form of digital currency is different from fiat currency.
The digital currency can be transacted using wallets which are backed by blockchain. The introduction of the concept of CBDC is an impressive start for the country.
Bitcoin inspires the digital rupee. The currency will be different from the market’s decentralize virtual currencies and crypto assets. The currencies and assets lack legal tender and are not issued by the state, making them different from digital currencies.
CBDC will enable people to conduct domestic and cross-border transactions. Besides, it will be done without a third party or bank.
Why do we need CBDC?
CBDC will offer the citizens of the country potential benefits. It will reduce the country’s dependency on cash, high inflation tax due to lower transaction costs, and it will reduce the settlement risks.
In addition, the digital currency will lead to strong, efficient, trusted, legal and regulated payment options.
Also, there may be certain risks of the digital currency which can be evaluates for beneficial investments.
But, overall the digital currency will be a great tool for the country. It will reduce cross border transaction cost, make investments and payments more simplified. Besides, it will bring modernisation and familiarise people of the country to the digital world.
A great opportunity for the citizens towards digitalization. India is developing in the digital sector and it can be a good push for them.
Indian digital currency is a great boost to the country’s economy. The Central Bank Digital Currency will introduce by the RBI in 2023 and the authority will also circulate it for people’s use.
This a great initiative for the country as it is going to be the first digital currency to have legal tender status.