Digital currency in India: On Tuesday, the Reserve Bank of India (RBI) announced the introduction of the eagerly anticipated Central Bank Digital Currency (CBDC), or what it refers to as the digital Rupee. On December 1st, the test run for this online form of cash money will begin. The service will initially only be offered in a few places since RBI has originally partnered with four banks for the trial.
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Beginning on December 1, the pilot’s first phase will involve four banks in Mumbai, New Delhi, Bengaluru, and Bhubaneswar: State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank. In the future, the pilot will include four other banks: Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank. The option would reportedly be extended to many more Indian regions, including Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla, according to the central bank.
There are currently no specifics as to when the public deployment of the digital Rupee will take place, but it appears that it will take some time. The RBI intends to initially evaluate the “robustness of the entire process of digital rupee creation, distribution, and retail usage in real-time. “Different features and applications of the e-Rupee token and architecture will be tested in future pilots, based on the learning from this pilot,”
How to use the digital rupee?
So, how does the digital rupee operate? Can people buy things with digital rupees? The answer is users will be able to shop at their nearby Kirana stores using digital Rupee. The exchange of digital rupees can take place between individuals (P2P) and businesses (P2M) (P2M). As per the central bank “The e-Rupee would offer features of physical cash like trust, safety and settlement finality. As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks,”
Is it like cryptocurrency?
Although many people might associate it with cryptocurrencies, there is no connection. Blockchain technology underpins cryptocurrency, whereas the digital rupee is a type of token that serves as legal cash.
The digital Rupee, or e-Rupee, is produced in the same denominations as paper money and coins, in contrast to cryptocurrencies. While the value of cryptocurrencies, such as Bitcoin, fluctuates, the value of the new token system does not. While users can invest in cryptocurrencies, the digital rupee is given to the users b the bank.
According to the RBI, consumers and businesses would be able to acquire digital rupees through middlemen like banks. Vaidyanathan, managing director and CEO of IDFC First Bank, stated in an interview that “banks will indent digital currency of specific denominations and such digital currency will appear in the banks’ wallets. When the customer will indent them the bank will provide them digital currency.”
RBI has earlier made it clear that customers will be able to utilise the e-Rupee to conduct transactions through a digital wallet provided by the approved banks and kept on their mobile phones. Similar to how digital transactions are carried out, customers will be able to use QR codes displayed at merchant locations to make payments through e-Rupee. When the trial programme starts on December 1, it will be evident exactly how to use the digital rupee.
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