The basic notion of digital currency has been in existence for more than a quarter-century. Digital currencies were originally issued by central banks, such as DigiCash in 1989 and e-gold in 1996. However, the emergence of Bitcoin in 2009 significantly altered this paradigm.
A concept note on digital money has been issued by the Reserve Bank of India. It aims to prepare experimental deployments of a central bank-backed digital currency (CBDC) or e-Rupee. Central banks and governments all over the world are looking into the use of digital currencies that are backed by the government. Like fiat money, these currencies will have the full confidence and support of the government that issued them. Numerous cryptocurrencies, or digital currencies, have already been produced in their thousands.
The use of a centralized, permissioned network, which they operate on, makes a significant distinction. This gap is rapidly narrowing as commercial organizations and monetary authorities issue stable cryptocurrencies and CBDCs as solutions for mainstream payments. According to the RBI, the digital rupee would support India’s digital economy and improve the effectiveness of the banking and payment systems. The digital currency, known as the Digital Rupee, or e-Rupee, will be identical to a sovereign currency.
I conclude that the Indian government is drafting laws that may forbid some cryptocurrency-related behavior. The new payment ecosystem will be able to arrange itself around a well-designed CBDC, which will be a safe and impartial payment and settlement asset. If all private bank deposits were transferred to CBDCs, conventional banks would be forced to act as “loanable funds intermediaries” under the control of the central bank.
As of May 2020, only 35 nations were exploring a CBDC. By December 2022, every G7 economy would have advanced to the CBDC level. Over 95 percent of the world’s GDP, or 114 nations, are considering a CBDC. Das focused-on cryptocurrencies as his major area of worry, labelling them “speculative.” The governor of the Reserve Bank of India is advocating their outright prohibition. CBDs dealt with the issues.
Improved cross-border payments, freedom from credit and liquidity risk, financial inclusion, and more public access are just a few of the benefits. The development of CBDC has now advanced in 18 of the G20 nations. Das’ remarks come as India’s central bank works to roll out its own digital rupee.
