India’s Reserve Bank (RBI) has begun a pilot project for its digital currency e-rupee in a historical adoption of virtual currency after initially rejecting such an idea. Called CBDC, the electronic rupee will be exchangeable with regular money and also be used for payments. Right now, it is used for government securities in its trial.
India’s central bank released its concept regarding virtual currency on 7 October. It is literally the same currency issued by the bank but used in digital form.
But the digital Indian currency doesn’t differ much in character as they do in form. It is an extension of the fiat currency and serves as an additional option for banknotes. The only difference is that CBDC is transacted in electronic form.
The digital rupee is India’s alternate equivalent of cryptocurrencies which the country has dismissed as a risk to its financial stability.
As it retains the sovereignty of the domestic currency, CBDC is called a safer option than blockchain-based currency.
Cryptocurrency Vs Digital Currency (E-Rupee)
A CBDC is issued by a central bank of the country in a digital form. It is similar to the fiat currency.
But a CBDC can’t be exactly compared to cryptocurrencies.
“Unlike cryptocurrencies, a CBDC isn’t a commodity or claims on commodities or digital assets. Cryptocurrencies have no issuer. They are not money (certainly not currency) as the word has come to be understood historically,” RBI said.
The CBDC is issued by central banks and thus regulated unlike cryptocurrencies such as bitcoin. Such a currency is responsible for governing and managing the asset.
E-rupee is a legal tender. People will be able to use it to pay for goods and services just as with regular money.