Rupee to go digital: What Budget's CBDC move signals (2024)

FAQs

What is the difference between CBDC and Digital Rupee? ›

The difference between CBDC and the rupee is simple: the former is the digital version of the latter. That's it! But while CBDCs are a form of electronic money, they also differ from cryptocurrencies and other digital currencies as a central bank backs them and is legal tender.

The Reserve Bank of India is set to launch the pilot of its central bank digital currency (CBDC), which it categorizes as legal tender in a digital form. Commonly known as the digital rupee, it will be exchangeable at par with existing currencies and will be considered acceptable for payments and a safe store of value.

CBDCs have the potential to provide several benefits to the Indian economy, such as: Increased financial inclusion by allowing those without traditional bank accounts quick and low-cost access to digital financial services.

The Digital Rupee (e₹) or eINR or E-Rupee is a tokenised digital version of the Indian Rupee, issued by the Reserve Bank of India (RBI) as a central bank digital currency (CBDC). The Digital Rupee was proposed in January 2017 and launched on 1 December 2022.

Is the US Going to Digital Dollar? As of June 2024, the US Federal Reserve has not decided to transition to a CBDC or supplement its existing monetary system with one. It is researching the effects a CBDC would have on the dollar, the US, and the global economy.

The Bahamas, Jamaica, and Nigeria have already introduced CBDCs. And more than 100 countries are in the exploration stage. Central bankers in Brazil, China, the euro area, India, and the United Kingdom are at the forefront.

This is an effort by a growing number of countries to reduce the role of the U.S. dollar in international trade. Countries like India, China, Brazil, Malaysia and Bolivia, among others, are seeking to set up trade channels using currencies other than the almighty dollar.

What is the limit of digital rupees? ›

CBDC is generally defined as a digital liability of a central bank that is widely available to the general public. Today in the United States, Federal Reserve notes (i.e., physical currency) are the only type of central bank money available to the general public.

Will a U.S. CBDC replace cash or paper currency? The Federal Reserve is committed to ensuring the continued safety and availability of cash and is considering a CBDC as a means to expand safe payment options, not to reduce or replace them.

The central bank digital currency is unlikely to replace cash and other digital mediums of transactions but could coexist with them. Despite the demonetisation of 2016 and the rise in digital transactions that followed, the economy's dependence on cash has remained as high as ever.

The price of converting 1 CBDC (CBDC) to INR is ₹0.002890 today.

A central bank digital currency (CBDC) is a form of digital currency issued by a country's central bank. It is similar to cryptocurrencies, except that its value is fixed by the central bank and is equivalent to the country's fiat currency.

Ans: “Digital Rupee” or “e₹” is a legal tender, similar to sovereign paper currency, and is issued in digital form by the Reserve Bank of India. e₹ will offer features of physical cash like trust, safety and settlement finality with atomicity (i.e. immediate settlement of transactions) in digital mode.

CBDC provides the feasibility to reduce concentration of liquidity and credit risk in payment systems. UPI on the other hand is a payment platform that enables instant money transfer between two bank accounts through a mobile phone.

Difference between CBDC and mobile money:

Mobile money is the liability of commercial banks and other authorized financial institutions, whereas CBDC is the direct liability of the central bank as it is the primary issuer of the currency.