e-rupee: UPSC Important Topic | 5 December 2022

e-rupee

∆Definition:

RBI defines the CBDC as the digital form of currency notes issued by a central bank. It is a sovereign or entirely independent currency issued by the central bank (in this case, RBI), in accordance with the country’s monetary policy.

∆Legal Tender:

Once officially issued, CBDC will be considered as a medium of payment and legal tender by all three parties – citizens, government bodies, and enterprises.

 Being government-recognised, it can be freely converted to any commercial bank’s money or notes.

RBI is not in favour of e-rupee with interest. Because people might withdraw money from banks and convert it to digital rupee – causing banks to fail.

∆Difference with Cryptocurrencies:

The underlying technology of  crypto currency can underpin parts of the digital rupee system, but the RBI has not decided on this, yet. However, cryptocurrencies like bitcoin or ethereum are ‘private’ in nature.

Digital rupee on the other hand, will be issued and controlled by the RBI.