The trend of digital currencies has been globally accepted as a new mode of transaction. The launch of RBI’s digital rupee in India is believed to be a new era! An electronic version of cash sounds interesting! However the question here is, does the digital rupee have the potential to outpace other modes of transaction, or is it just going to get off on its own? Let’s find out about it!
Did you know that as of March 2022, the Atlanta council stated that around 87 countries were considering issuing a CBDC, out of which 9 countries have already launched a centrally governed digital currency?
The popularity of digital currencies has skyrocketed. Especially after cryptocurrencies gained such colossal attention because of their decentralized nature. Governments across the globe became active in trying to make the most of virtual currencies differently.
This, they believed could be done with the use of a Central Bank Digital Currency or CBDC, directly controlled by the central bank. It’s a digital version of a country’s fiat currency. As a result, the central bank issues electronic coins or government-backed accounts.
In a pilot program, India’s central bank has enlisted nine private and state-owned banks to conduct interbank transactions using its digital rupee. It will have the same value and legitimacy as a banknote or coin, except that it will take no physical form, for easier transfers and settlements.
As it will be the direct responsibility of the central bank, it can be used by all – the private sector, non-financial consumers, and businesses.
As per the RBI, “CBDC is the legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different.”
Let’s see how will it function:
“The e-R would offer features of physical cash like trust, safety, and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks,” the RBI said.
The major difference between the two will be about the presence of intermediaries enabling a transaction. Presently, the transfer of money that you do over UPI initiates a request & forwards it to the banks. Then the bank, being the decision maker decides to deduct the balance & transfer the money to the beneficiary account.
However, with the digital rupee, there will be no need for intermediaries involved in your transaction process. Here, you could transfer the digital money from your wallet to another wallet of an individual or a merchant. In simpler terms, it’s the same way you handle physical cash from your wallet but here, it would only be a digital wallet!
The digital Rupee is different from traditional cryptocurrency. The RBI backs this Central Bank Digital Currency (CBDC), also known as Central Bank Digital Currency (CBDC).
You might have faced a situation when you want to transfer a large sum of money & gets restriction from the bank side. Considering the UPI payments too, there is a certain restriction on your daily limit. To ease this situation, the digital rupee stored in your wallet will transfer the money instantly!
As stated by the RBI, digital currency is currently available for a close group of people in selected cities. If you are in that selected group, this is how you will be able to avail of CBDC services:
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