India is on the way to making its place in the run of those countries that are launching their digital currency when it is emerging as a popular concept worldwide. With people taking immense interest to use and invest in digital currency, it is important to understand the concept of the Digital Rupee and the need of the Indian subcontinents ruling government to launch it on a national scale.
In the Union Budget for 2022-23, the present Finance Minister – Nirmala Sitharaman talked about the launch of the virtual currency space. Besides announcing a flat figure of 30% tax on profits from all virtual gains from currencies such as Bitcoin, she also discussed the launch of a Central Bank in the session for the Union Budget.
Most of the developing and the developed market economies are either extending the development of the digital currency or are stating the non-use as they are not hurrying the use of the same. There have been many arguments that either support or neglect the use of digital currency. It is believed that electronic representation of Indias legal tender will boost its digital economy and help it maintain its position in international market dealings.
However, the concept of the digital rupee is incomplete without evaluating the risks that are associated with a hasty transition to a Central Bank Digital Currency (CBDC). A CBDC makes prominent use of electronic record that acts as a digital token to represent the virtual form of a fiat currency of a particular nation or any region, in the Indian context.
What is Digital Rupee?
In simple language, the Digital Rupee is Indias Own Digital Currency. The Reserve Bank of India (RBI) will be issuing the digital currency in the next fiscal that is from 2023 onwards and this will be called Digital Rupee. The digital rupee functions like banknotes but the use of ATMs will be eliminated in such cases.
The digital rupee allows the transfer of purchasing power from the deposit accounts into smartphone wallets. They act as online tokens and are a liability of the Reserve Bank of India.
Advantages of Digital Currency
CBDC offers the convenience and security of digital forms like cryptocurrencies. It maintains the regulated, reserved-backed money circulation of the traditional banking system.
Digital currency helps in the risk mitigation of losses that the Indian depositors tend to face when dealing with commercial banks.
Consumers may find an e-rupee to be a safer alternative to bank deposits.
The users of digital currency can convert to cash at face value, which may get reduced to a theoretical construct.
Digital currency can help to keep the notion of convertibility grounded in daily reality.
It helps in the elimination of the need for an expensive network of correspondent banks to settle issues related to cross-border payments. Also, for the Indians that are working abroad, sending money home will become simpler and cheaper. This will result in huge savings for India.
Disadvantages of Digital Currency
If the digital currency or cash becomes popular and the RBI places no limit on the amount that can be stored in mobile wallets, there are chances that the weaker banks will have to struggle to retain low-cost deposits.
Most of the CBDCs will be designed so that the central banks will be able to trace the spending.
However, the transactions that are conducted with them may not be visible to payment apps.
Why is the Digital Rupee required?
The launch of the Indian digital rupee is a response to the propelling demand for cryptocurrencies. Also, international competition is like a desire to head off China which is also set to launch its e-CNY (Chinese Yuan Renminbi). With the launch, China intends to promote a rival to the dollar in cross-border trade and finance.
The launch of digital currency has the potential to function as a well-evaluated plan that offers a depleting usage of paper currency. Also, there is a need to popularize electronic platforms of currency that will have a positive effect on the development of the Indian economy. This becomes more efficient in high physical cash usage economies like India.
However, there is a constant need for the RBI to focus on blockchain technology and other requirements that will be used to run the digital currency. Also, it will need to balance the often-conflicting goals related to the maintenance of speed, scalability, and others like security and privacy.
Advanced Certification in Applied Data Science, Machine Learning & IoT By E&ICT Academy, IIT Guwahati
9 months
Certification in Data Science and Machine Learning With Python By The
IoT Academy Noida
180 Hrs
