(Image source from: Reuters.com)
The Reserve Bank of India (RBI) announced about launching a digital currency in the country before the end of this year. The Central Bank Digital Currency (CBDC) which is referred to as Digital Rupee will be launched very soon informed the Reserve Bank of India. This move is taken because of the wide circulation of the cryptocurrencies. RBI said that the digital rupee will be another option for the available forms of money. CBDC would be a legal tender that will be issued by the Central Bank in a digital form. Their aim is to create a digital Rupee that is close to a paper currency and also to manage the digital currency seamlessly. CBDC can be used by the private sector, non-financial consumers and businesses. The wholesale CBDC which is termed as CBDC-W is designed for restricted access for the financial institutions.
CBDC-W is used to settle the interbank transfers and other wholesale transactions. It is also an electronic version of cash meant for the retail transactions. A token-based CBDC can be viewed as a preferred mode for CBDC-R as it is close to physical cash. The other reasons for introducing the digital currency by the RBI includes the reduction of the operational costs that are spent to make physical cash and innovation in the payment system. The offline features in CBDC will benefit the people in remote locations when the electricity and mobile network are not available. The mushrooming of the private cryptocurrencies from the past few years made RBI and the government of India to think about introducing the digital currency in the country.