What is Digital Rupee? How it works?


On 1st February, Finance Minister of India, Nirmala Sitharaman has announced the launch of a digital rupee in India. During the announcement of the union budget for the financial year 2022-2023, she also made this announcement. It is one of the daring steps taken by the government of India. She said that it will be introduced in the next financial year 22-23.

During her presentation, she explained all the benefits that the country is going to enjoy due to the launch of the digital rupee. Sitharaman said that Digital Rupee will be very helpful in making currency management cheaper and more efficient. It is going to boost the digital economy in the country. So, here is some information that will help you understand what is the digital rupee and how it is going to work. Also, you will be able to know how it is going to be helpful to everyone.

What is Digital Rupee?

Digital Rupee means CBDC. CBDC stands for Central Bank Digital Currency. This digital currency can be used just like regular currency but in digital form. This digital money is stored in a very secure format. This CBDC is powered by the same blockchain technology, which is used by cryptocurrency. With this technology, the process of managing money gets cheaper. So, the government will not have to print too much currency in the future. Making risk factors of Bitcoin investment.

Also, this digital rupee is present in digital form. That means, there is no lifespan for the currency. You don’t lose it or it will not get destroyed.

Currency is usually issued by the sovereign and it is the central bank of India for India. In the bank’s balance sheet, it will appear as a liability. But for those who are holding it, it is an asset. Currency is a legal tender and regulated by the government and central bank.

Usually, cryptocurrency is not regulated by any bank or government. But when it comes to Digital Rupee, it is issued by the central bank of India and is regulated by the central bank.

How does Digital Rupee work?

Blockchain technology is used to power the digital rupee. But it is still monitored and governed by the central body. That means, there will not be the issue of volatility due to many factors. Also, this digital rupee is just another form of fiat currency, it will move the digital payment to the next level. We still need to wait for the government of India to decide on how it is going to work exactly. You will have to wait for the launch of the digital rupee in the next financial year. 

What are its advantages?

When central bank digital currency is very much similar to fiat currency, then what is its use? One of the main advantages of the digital rupee is it is final payment. So, there will not be any declines in the final settlements of the payment. Any interbank settlement necessity will not be there when you transact with the digital rupee. 

International payments get easier with the help of a digital rupee. If there is any businessman who will have to pay to it exporter in the dollar, then they can use digital rupee. You don’t need any intermediary or exchange for converting the rupee into dollars. It is going to be fast and simple. The transaction is going to be very much similar to just handing over cash in dollars. 

Another benefit and the best thing that everyone would love is there is no time-zone limitation. With a digital rupee, any digital transfer made is final. There is no need for any third-party approval like a bank. That means you don’t have to wait for the bank working hours or for the bank’s batch to run. The digital rupee is available 24*7 and 365 days a year. 

So, that was all about the digital rupee and how it may work. But the exact process of its working will be known only after its launch. We will have to wait till next financial year 22-23 for more information about the digital rupee. It is going to be very beneficial for everyone when used in the right way.

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