RBI’s New Central Bank Digital Currency (CBDC) in Budget 2022: Useful Details

New Central Bank Digital Currency (CBDC)

RBI’s New Central Bank Digital Currency– Finance Minister, Nirmala Sitharaman, has announced the introduction of Digital Rupee to be issued by the RBI using blockchain technology while introducing the budget 2022. The Reserve Bank of India will launch the Central Bank Digital Currency from the next financial year that will be used by blockchain technology.

What is CBDC

Currency is fiat money, which means it is legal tender. The most common form of currency is paper (or polymer), although the form of currency is not its distinguishing feature

CBDC Key Highlights:

  • RBI announced the Digital Currency (Digital Rupee) using Blockchain and other technologies.
  • A digital version of fiat currency is, by definition, an digital token and has no physical presence thar best replacement for cash for an economy.
  • The Central Bank Digital Currency (CBDC) will give a big boost to the digital economy.
  • Digital currency will also a more efficient and cheaper currency management system.
  • 75 Digital Banking Units To Be Setup In 75 Districts By Scheduled Commercial Banks.
  • The Reserve Bank had, in July 2021, indicated that it would soon begin work on the ‘phased implementation’ of the CBDC.
  • Central Bank Digital Currency aka Digital Rupee is a legal tender issued by the Reserve Bank of India.
  • A CBDC is an electronic record or digital token of a country’s official currency, which fulfills the basic functions as a medium of exchange, unit of account, store of value, and standard of deferred payment.
  • Central Bank Digital Currency is the same as currency issued by a reserve bank but takes a different form than paper currency.
  • The Central Bank Digital Currency should be exchangeable with cash.
  • Digital Currency will eliminate the need for interbank settlement.
  • Users of Digital Rupee will be able to transfer purchasing power from their deposit accounts into their smartphone wallets in the form of digital tokens, which will be a direct liability of the Reserve Bank of India, just like cash.
  • “A CBDC, which is a liability of the Reserve Bank, will mitigate the risk of losses that Indian depositors face when dealing with commercial banks.”
  • The Finance Minister Nirmala Sitharaman assured that the financial support for the digital payment ecosystem announced in the previous Budget will continue in 2022-23. This will encourage further adoption of digital payments. There will also be a focus to promote the use of payment platforms that are economical and user-friendly.
  • The announcement regarding Digital Rupee in the Budget essentially expresses the government’s intention on cryptocurrencies and other digital currencies.

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