- Date : 29/03/2022
- Read: 3 mins
Our Union Finance Minister, Nirmala Sitharaman, launched the Central Bank Digital Currency (CBDC) in the Union Budget 2022-2023. The CBDC is known as Digital Currency that has made rounds since its announcement. Let's dive in and understand digital currency and everything it entails.
Governments worldwide are experimenting with this new technology and have been able to build a cashless society partly because of blockchain and bitcoin technology.
According to the RBI, the Digital Rupee or CBDC is a digital currency that the central bank has issued. In simple terms, it's a digital form of the Indian Rupee. As soon as the digital currency starts to get in use, we would be able to utilize it similar to the normal rupee. Digital wallets, IMPS, and NEFT are a few digital rupee examples. Retail and wholesale transactions can take place with the digital rupee.
What Is the Difference Between the Digital Rupee and Cryptocurrency?
The Digital Rupee will be a legal tender and centralized. This means that the digital rupee will be regulated. Technologies such as Blockchain, Cryptocurrency, and Bitcoin are not legal tenders and aren't held by government authorities or banks. Cryptocurrency is seen as a virtual asset, not as legal tender.
What is the Significance of the Digital Rupee?
The key reason behind launching the Central Bank Digital Currency (CBDC) or Digital RUpee is that the world is shifting towards digital currency, and India does not wish to fall behind the rest of the world. Another primary reason to launch the Digital Rupee was that the private cryptocurrencies could be used for terrorism, tax evasion, money laundering, etc.
The Indian digital economy will receive a massive boost with the introduction of the Digital Rupee. It's predicted that Digital Currency would be far less expensive and more efficient than the current currency management system.
When will the RBI Launch the Digital Rupee?
The launch date has not yet been announced. However, the Digital Rupee will make its grand entrance sometime in the 2022-2023 fiscal year.
Is it true that the Indian government has approved the use of digital currency?
Technology like Bitcoin is still not recognised as legal tender, at least in our country. The Digital Rupee is a way to move towards Digital Currency. For taxation purposes, it was important to create a virtual currency. On the other hand, taxation is still a long way off, as Digital Currency is only now being recognised.
Our Union Finance Minister stated that discussions on Cryptocurrencies are underway and that once they are completed, it would be obvious what is and is not legal tender.
What are the Advantages and Disadvantages of CBDC Digital Payment?
- The payments with CBDC will be final. This means that the risk of settlement through the financial system will be reduced.
- It'll allow real-time payments.
- It'll be cost-effective.
- A person can pay anywhere in the world at any time. A person in India, for example, can send digital money to the United States in real time.
- Time zone will not be a factor anymore.
- As of now, it's impossible to foresee the outcome of CBDC's impact on the financial system.
- To maintain a lid on financial crimes, the government would have to impose a lot more regulation and supervision.
- Criminals will still exist, but they will do so digitally rather than physically in the banking system.
- Theft is also a possibility.