The Indian Government and the RBI didn’t take much of a shine to the unregulated cryptocurrency boom in the country. What began as a huge race to put money into crypto and see multifold returns was taxed heavily by regulatory bodies. Meanwhile, there was a sudden interest in developing a digital currency backed by the government. Thus, the Digital Rupee was born.
Today, RBI launched the Indian Digital currency, which can be used to trade in government securities as of now. Nine banks will participate in this pilot program, namely – State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank, and HSBC.
6 points for Indian digital currency e-rupee
- It is backed by fiat currency. You can trade physical INR for a Digital Rupee without losing any of its value.
- It will use blockchain technology at its core. So, all the useful traits of a cryptocurrency will be available with the Digital Rupee, also. Its existence and transfer will be documented using the distributed ledger system.
- Digital Rupee will be available in two types, namely – general purpose or retail (CBDC-R) and wholesale (CBDC-W). RBI will define the issuing and managing authority that will oversee all transactions using the Digital Rupee.
- Digital Rupee will make India one of the few countries to adopt a centralized cryptocurrency system. China was the first to set the trend for government-issued digital currency, and India now joins that list, including some other countries.
- It will help reduce the expenses and problems associated with managing the paper currency system. Unlike a banknote which can be torn, mutilated, or used for illegal activities, Digital Rupee will be a useful addition to the slowly strengthening Indian economy.
- The public rollout begins after one month. RBI’s document doesn’t define how the rollout will happen for the public. So, it would also be a testing phase that identifies the pain points of the newly-developed digital currencies.
The digital rupee will certainly excite or confuse many investors. But while it is clear that digital currency will soon become the new norm, the reliance on paper notes will be reduced. There are a lot of challenges as well – creating the complete infrastructure for the digital rupee, transactional charges, and, most important of all – its security.
