What is Digital Rupee?: Amidst the ongoing worldwide discussion of cryptocurrency, the Reserve Bank has launched Central Bank Digital Currency, which is also being called Digital Rupee…
Amidst the worldwide discussion about cryptocurrency, the Indian Central Bank RBI has started digital currency. Many big banks of the country have started the facility of transactions in digital currency. India’s Central Bank Digital Currency i.e. CBDC is also known as Digital Rupee or e-Rupee. Recently, the name of the largest government bank SBI has also been added to the banks offering this service. Currently, apart from government banks, many private banks are providing the facility of digital rupee to their customers. Let us know what digital currency is and how it works!
What is digital currency?
Digital currency is a currency which is available completely in electronic form. Currently, there are mainly three types of digital currency – Cryptocurrency, Central Bank Digital Currency i.e. CBDC and Stable Coin. They work on state-of-the-art blockchain technology. The most important thing about them is that their transactions are completely virtual.
There are many cryptocurrencies available today. Like Bitcoin, Ethereum etc. USDT, USDC, TrueUSD, BUSD etc. are examples of stable coins. Central Bank can understand digital currency as digital rupee i.e. e-Rupee.
What is RBI’s digital rupee?
Now let us understand the digital currency of RBI i.e. digital rupee. Just as the Reserve Bank mints coins and prints notes, similarly the RBI creates the digital rupee token. Just as coins and notes are delivered to the market and people through commercial banks, similarly banks also deliver tokens i.e. digital rupees to the people. Those to whom the Reserve Bank issues tokens are called token service providers. These are called the banks selected by the Reserve Bank. Lastly, banks i.e. token service providers distribute tokens to the interested people i.e. provide digital rupee.
What is the value of digital currency?
The value of digital rupee is exactly equal to notes and coins. For example- if the bank has given you 20 digital rupees, then its value is equal to 20 rupee notes or coins. You can use digital rupee instead of cash. Now, like UPI, the facility of scan and pay has also become available. Digital rupee transactions are also becoming possible through UPI.
How does digital currency work?
All the banks selected by RBI for digital rupee have provided the facility of app and wallet to the users for digital rupee. You can store your digital rupees on CBDC-R app. It is just like you keep money in your bank account and it is visible in your bank’s app. Its working method is like any common digital wallet.
Why was there a need for digital currency?
Now the last question that arises is why did the Reserve Bank need to introduce digital currency or in other words what are the benefits of digital currency? So let us know what are the benefits of digital currency…
5 big benefits of digital currency
- 24 hours availability: To withdraw cash you need to visit an ATM or bank branch. You may have money in your account, but you do not always have cash with you. Digital currency is different in this matter, whose availability remains 24 hours.
- Less cost of manufacturing: Whatever notes or coins you use, the Reserve Bank needs to spend a huge amount in their manufacturing. For this, the Reserve Bank has set up printing presses and mints at many places. This is not needed in digital currency. It is possible to issue it at very low cost.
- Easy Maintenance: Be it coins or notes, they have a limited lifespan. Notes can burst or melt in water. Problems may arise with coins also. In the case of digital currency, these problems get rid of.
- Low transaction costs: Any transaction you do has a cost. For this reason, you must have noticed many times that when you make payment through credit card or debit card, you sometimes have to make extra payment. If the transaction is global then the cost becomes higher. In case of digital currency the cost remains very nominal.
- Ease for customers: If you are an end user then you also have many benefits from this. As mentioned above, you have 24/7 availability. You do not have the fear of losing money. Digital currency cannot be lost or someone can steal it from your pocket.