The Digital Rupee and Cryptocurrency Conundrum
The currency notes that the central bank has produced in digital format are referred to as the “digital rupee,” also known as “Central Bank Digital Currency” (CBDC). It is just like currency, but because it is digital, it is simpler, faster, and less expensive. It also offers all the transactional advantages that other digital payment systems offer.
The State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank are the four banks from certain regions with which the RBI has cooperated. This new pilot’s initial focus will be on the closed user group (CUG), which is made up of participating customers and businesses.
The e-Rupee proposed by the RBI would take the form of a digital token that serves as legal tender and will be distributed in the same denominations as coins and paper money currently are. Banks will act as mediators in the distribution of India’s first digital rupee.
The Digital Rupee
The RBI’s CBDC is designed to provide yet another way to use money. The only thing that makes it different from the banknotes that are already in use is that more digital transactions are expected to be conducted using the digital rupee.
The RBI’s digital currency is the name for a central bank’s digitally issued legal tender (CBDC). The sovereign electronic currency will appear as a liability on the balance sheet of the central bank. It is identical to fiat money and can be used interchangeably with it.
How will it Work?
The e-rupee will be supplied in two different forms: wholesale for use in interbank settlements and retail for general consumption. Even though the RBI issues digital currency, commercial banks can disseminate it. E-rupees will be disseminated to the general public through a token-based method. The individual sending the virtual currency must be aware of the recipient’s public key. The public key and the recipient’s private key are both required to complete the transfer.
