RBI’s to launch new digital currency – What is CBDC?

A central bank issues CBDC as legal money in electronic form. It is interchangeable one-to-one with fiat currency and is the same as fiat currency. Its only distinction is in form. Wallets supported by blockchain can be used to transact using the digital fiat currency, or CBDC.

The digital rupee Central Bank Digital Currency (CBDC) of the Reserve Bank of India (RBI) may be rolled out gradually, starting with wholesale enterprises during the current fiscal year. Nirmala Sitharaman, the finance minister, stated in her budget address that the central bank would introduce the CBDC in the fiscal year 2022–2023.

In October of last year, the RBI made a proposal to the government to expand the use of the paper rupee to include money in a digital format. The RBI has frequently expressed its aversion to private digital currencies.

How will CBDC help?

Increased seigniorage due to lower transaction costs, decreased settlement risk, and decreased reliance on cash are just a few advantages that could result from the introduction of CBDC. The use of CBDC might also result in a more reliable, effective, regulated, and legal tender-based payment method. However, there are also related hazards that need to be carefully weighed against the potential advantages.

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