NS reserve Bank of India (RBI) is gearing up to launch in a phased manner central bank digital currency (CBDC), which is targeted to be launched by the end of this year. Even before the recent rise of bitcoin and other cryptocurrencies, many financial institutions around the world are grappling with the idea of a digital currency that is officially recognized and part of the day-to-day financial system. launch of CBDC The first will be a historic first for India as it will be the pioneer of digital currency in the country. The focus of a central bank like RBI is essentially to support the banking systems in the country rather than acting as a traditional bank. It is a kind of governing body. In this sense, a CBDC would be something that supports the banking system or complements the existing framework.
RBI Governor Shaktikanta Das said in an interview with CNBC that the Reserve Bank of India may launch its first digital currency trail program by December. This could indicate that this is the first of a variety of digital currencies that may hit the market further down the road. “We are extremely careful about this as it is a completely new product, not only for RBI, but globally,” Das said in an interview with CNBC.
What is Central Bank Digital Currency?
A central bank digital currency is basically a digital or virtual currency issued by a central bank in the form of a tender. It has the same functions as existing digital/fiat currency. More importantly, it is a legally recognized currency in which the existing financial body supports its operations. It is also exchangeable one-to-one with fiat currency, the only thing that is a big difference from private digital currencies like bitcoin and ether, it has a different form. It’s basically like digitizing your money and the value remains the same.
How is it different from cryptocurrency?
One major difference with cryptocurrencies like bitcoin is that they stand more as commodities rather than representing the exact value of the currency of the monetary system. For example, one bitcoin is not equal to 1 rupee. One has to invest in bitcoin and buy it with the currency and that’s the biggest difference. Another important factor is that cryptocurrencies are highly volatile and have no legal issuer, whereas the central bank digital currency has the RBI as the issuer, which means that the central bank digital currency is considered money in every sense of the word. can go.
Where does India stand on Central Bank Digital Currency?
Das had mentioned that the RBI aims to launch the central bank’s digital currency as a digital asset on a large scale. The RBI itself issued a note stating that the central bank’s digital currency and its interest as an asset were universal, but very few countries have even come close to the pilot stage of launching such an effort. One of the reasons behind this move towards digital is that the RBI has a steadily depleting currency for traditional paper currency. Add to this the fact that we live in an era of sustainability of endeavor and the digital medium seems to be the only viable long-term solution.
The government is also looking to address the public’s needs for digital currencies that have become all the rage in recent years. This will help reduce the harmful consequences of operating in the realm of private currencies that are not regulated to the current financial system.
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