They are not money (certainly not currency) as the word has come to be understood historically,” as said in the announcement made by RBI. Individuals are charged high fees to move funds from one nation to another, especially when it includes currency conversions. Digital assets could interrupt this market by making the transaction cost-effective and quick. This is completely different from Bitcoin, which does not enjoy the status of ‘legal tender’ and is not backed by the state or any central bank.
“As it being a sovereign currency, ensures settlement finality and thus reduces settlement risk in the financial system. CBDCs could also potentially enable a more real-time, cost-effective seamless integration of cross border payment systems,” the RBI stated. “The e₹-R would be in the form of a digital token that represents legal tender. It would be issued in the same denominations that paper currency and coins are currently issued,” it said. The RBI explained that digital Rupee or e-Rupee will be distributed through intermediaries like banks to customers and merchants.
The central bank revealed that the rollout of digital Rupee will happen in a phased manner. To start with, in the first phase the pilot will begin with four banks — State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank across only four cities. These cities include — Mumbai, New Delhi, Bengaluru, and Bhubaneswar. Going forward, RBI revealed, four more banks will join the pilot including — Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank.
If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle. In her speech, Sitharaman talked about the CBDC (Central Bank Digital Currency). Beijing, the first large economy to pilot a CBDC in April 2020, is aiming to have its digital yuan (e-CNY) widely used by 2023.
This was stated by the Union Minister of State for Finance, Shri Pankaj Chaudhary, in a written reply to a question in Lok Sabha today. The Reserve Bank announces the launch of the first pilot for retail digital Rupee (e₹-R) on December 01, 2022. It may be recalled that RBI had, in a Press Release dated October 31, 2022, indicated that the pilot in e₹-R would commence in a month’s time. Existing MobiKwik customers with completed KYC can immediately access the e-rupee wallet, while new users must complete video KYC verification.
Users will be able to transact with e-Rupee through a digital wallet offered by the eligible banks and stored on mobile phones or devices. E₹-W has the potential to transform the settlement systems for financial transactions and make them more efficient and secure. It leverages on the programmability and smart contract features of the platform and reduces settlement risk.
To begin with, a digital currency can never be torn, burned, or physically damaged. In comparison to notes, the lifeline of a digital form of currency will thus be indefinite. There’s always a possibility that hackers can bring down important financial frameworks and break the economic foundations of a nation. Centralized digital currency systems, like those for CBDCs, can allow the tracing and tracking of users’ information that compromises their privacy.
E₹ wallet is a digital wallet that can be opened on one’s mobile phone/device. E₹ wallet stores the Digital Rupee, similar to the physical wallet/purse that stores the physical currency. E₹ wallets are being currently provided by banks and non-banks, which are part of the retail CBDC pilot. The RBI said that this digital rupee will offer trust, safety and settlement finality like the physical currency.
