RBI’s CBDC or digital currency is a virtual currency, but it is very different from the fiat currency. It can be tracked at every level, ensuring the funds are deployed for relevant and rightful activities. CBDC helps reduce the cost of currency printing for the regulator and transaction costs for end-users. The new payment avenue will lead to widespread digitization, getting more transactions under the digital ambit.
CBDC can be considered similar to cryptocurrencies but are centralized and regulated. The first pilot of the retail digital rupee will be issued in the same denominations as the currently issued paper currency and coins. Person-to-Person and Payment to Merchant transactions can be made, and Payments to Merchants can be made through QR codes displayed at merchant locations.
Experts say, retail CBDC is helpful for the general public as they can use it in their day-to-day transactions. Also, CBDC is based on Distributed Ledger Technology, the same as the private blockchain network funded by the government, enabling tracking of anonymous transactions. Therefore, it facilitates making secure and safe transactions and prevents any illegal activity. Government can monitor and trace any suspicious transactions and implement anti-money laundering and combating financial terrorism measures.
Experts say, CBDCs, by their very nature, are digital versions of paper currency, and like paper currency, they will have unique serial numbers and denominations. The point is that the paper version of the rupee and the digital are the same.
CDBCs will convert a percentage of the paper currency into a digital version, which will then be used for merchant transactions for goods and services and for peer-to-peer transfers. This is advantageous to the country from both an efficiency and cost perspective. Because of instant settlement and high trust, this can be very useful, particularly in the hinterland areas.
Going forward, there has been substantial growth in the digital payments markets over the last few years, which only promises to continue. CBDCs will undoubtedly bring many efficiencies to the Indian payment system. India will join Sweden, China, the European Union, The Bahamas, etc., as a CBDC nation. Besides, the government should adopt safeguards to avoid threats of cyberattacks.
See What’s Next in Tech With the Fast Forward Newsletter
Tweets From @varindiamag
Nothing to see here - yet
When they Tweet, their Tweets will show up here.
