India’s Digital Currency

The Reserve Bank of India (RBI) announced that the Retail leg of its Digital currency pilot project would begin on December 1, 2022.

It was officially released on Tuesday, March 29, 2022, according to RBI. The distribution of the money would take the form of a digital token, which would serve as legal tender.

In the pilot project, the close user group (CUG), which consists of participating customers and businesses, will get the first distribution of the digital currency.

Digital currency is distributed solely through the chosen bank, and users can only transact through their digital wallet.

What is the Digital Rupee/Currency?

The central bank's new digital currency, the Virtual Rupee, which was introduced by the RBI in 2022, is a digital version of currency notes.

The money you have in your bank account is a physical form of money, and to maintain the economy, the RBI creates money in this form. However, as of right now, the new currency launched by rbi 2022, known as Central Bank Digital Currency or E-Rupee, will be equivalent to present physical money.

In simple terms, the digital money issued by the RBI is cash in a digital form.

Types of Digital Currency in India

There are two varieties of CBDC in the Central Bank Digital Currency of India (CBDC), which are:

1. Wholesale (CBDC-W): This product is intended for limited access to specific financial institutions.
2. Retail (CBDC-R): Retail CBDC could be used by everybody, including enterprises and non-financial consumers in the private sector.

Since the retail digital rupees are a direct responsibility of the Central Bank of India, they are expected to give access to a secure platform of virtual money for payments and settlement. Retail CBDC is the digital equivalent of physical cash and will be largely used for retail transactions.

Digital Rupee as an alternative to Cryptocurrency

The RBI has previously raised worry about the use of private cryptocurrencies like Bitcoin, Ethereum, and others for money laundering, financing terrorism, and tax evasion.

With the introduction of digital currency in India, the general people would have safer virtual money to use instead of cryptocurrencies, allowing them to enjoy the same benefits without taking a chance on unpredictable private digital assets like cryptocurrencies.

The launch of its own Digital Rupee has been considered a way to bridge the drawbacks and advantages of digital currency.

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