What is a Digital Rupee?

India is working towards launching a Digital Currency soon, this Digital Rupee or the Central Bank Digital Currency, also known as CBDC, is aimed at boosting our digital economy. This was presented in the Union Budget FY22-23.

The Digital Rupee will function using blockchain and similar technologies. This is also aimed at a more efficient and cheaper currency management system for the country. Digital Rupee will be issued by RBI, differentiating it from other cryptocurrencies in the market. RBI defines CBDC as a legal tender issued by a central bank in a digital form, it is a digital form of the fiat currency or the Indian Rupee which makes it fungible.

Key Takeaways:

• Digital currency is simply a digital representation of the currency that is backed by the sovereign.
• The cash circulation in India is close to INR 30.15 lakh crores and is expected to grow to INR 40 lakh crores in the next 5 years.
• In a Central Bank Digital Currency (CBDC), the Central Bank backs up the currency value (issued by a sovereign nation).
• Few countries are experimenting with multi and interchangeable CBDCs. When India implements such digital currency methods, we will take it beyond just the payments segment.
• There are immense and endless possibilities for CBDCs showcased by different geographies. The key is to set it into the Indian context for further innovation to happen in our digital landscape.