What Are The Advantages Of A Digital Rupee?There has been a lot of talk about the Central Bank Digital Currency (CBDC), or the digital rupee, the RBI has said it is working on.
Many countries have said they are working on similar currencies of their own.The need for digital currency has risen due to the growing importance of cryptocurrency.
Central banks worldwide fear the crypto industry, which essentially bypasses regulatory oversight, can threaten the existential financial system and thus want to manage its rapid adoption by their peoples.The supporters of the digital rupee say it can revolutionise the way we do business.
Still, its critics cite the lack of adequate infrastructure and hacking-related threats to call for more deliberations.
In the midst of this, the number of crypto users grows with each passing day.Advantages Experts say a digital rupee will increase transparency and efficiency.
It will be based on blockchain technology, allowing for real-time tracking and ledger maintenance.
It is also hoped that a digital rupee will propagate financial inclusion and effective fiscal and monetary policy implementation in a large country like India.
The digital rupee will significantly reduce the transaction cost and speed up account settlements as the transactions could be entered into the ledger in real-time.
Currently, banks update the ledger at the end of the day, meaning there's a lag.
Also, it would be available round the clock, and there would be no need to open a bank account to transact in digital rupee.
It will streamline cross-border transactions by reducing transaction costs.
Today, exporters have to go through multiple layers of banks, each levying a transaction cost.
With the digital rupee, traders can bypass the bans and deal directly with each other.
Unlike other cryptocurrencies, the digital rupee would be backed by the RBI.
This will mitigate the risk of volatility.
No physical damage.
As opposed to the currency notes, there is no risk of damaging a digital rupee by way of wear and tear or losing it during movement.The RBI will launch the digital rupee in the next financial year (FY23).