DIGITAL CURRENCY

RBI’s GIFT OF DIGITAL CURRENCY FOR INDIA

What exactly is a digital currency issued by a central bank?

  • According to a Bank for International Settlements (BIS) poll from 2021, 86 percent of central banks were actively exploring the possibilities of CBDCs, 60 percent were experimenting with the technology, and 14 percent were launching trial programmes.

What distinguishes it from digital payments?

The major distinction between CBDCs and other kinds of digital payments is that CBDC payments are final in nature, reducing settlement risks in the financial system. It is essentially the digital counterpart of paying cash for products and services, with no need for inter-bank settlements. Transactions including a central bank digital currency (CBDC) would therefore enable an even more real-time payment system.

According to the RBI, an Indian importer may be able to pay its American exporter in digital dollars in real time, without the requirement for a middleman. This would be the ultimate deal.

How prepared is India to implement this?

On 1 February, Finance Minister Nirmala Sitharaman stated that the central bank digital currency (CBDC) will be implemented by the RBI in fiscal year 23.

The Reserve Bank of India has made public its intention to phase in digital money. T. Rabi Sankar, deputy governor of the Reserve Bank of India, stated in December that the RBI has made great work on the wholesale component of the CBDC, but that the retail component will take longer.

What are the hazards associated with digital currencies?

Shaktikanta Das, the governor of the Reserve Bank of India, has raised worry about the potential of digital currency theft, emphasising the necessity for measures to resist nefarious activities. The technological barrier of keeping and trading in central bank digital currency (CBDC) by retail consumers is, of course, another concern.

It is contingent on the availability of high-speed internet and more access to technology in order to store and use CBDCs. There are also additional risks to be aware of. The RBI is particularly worried that lower levels of technology use in poorer countries might limit CBDCs’ reach.

Is Digital Currency India going to be beneficial ?

The central bank digital currency (CBDC) is unlikely to replace cash for people who prefer cash due to their uneasiness with digital ways of payment, according to RBI’s Rabi Sankar.

Those who want cash for anonymity can be led to CBDC acceptance as long as anonymity is guaranteed. It may also be beneficial for persons who are unable to register and transact on India’s home-grown payments system, the unified payments interface, due to a shortage of debit cards.

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