Prime Minister Narendra Modi said that the digital rupee will create new prospects for the Fintech sector and will enhance the digital economy significantly. Also, in her Budget 2022-23 speech, Union Finance Minister Nirmala Sitharaman proposed that the Reserve Bank of India (RBI) implement digital money in the next financial year, commencing April current year, to facilitate currency management. "There is also a lot of discussion regarding Central Bank Digital Currency in today's publications," PM Modi said while addressing BJP workers and leaders on Budget 2022-23.
The digital economy will benefit greatly as a result of this. This digital rupee, which is currently our physical money, will be managed by RBI and will have a digital form. It is possible to swap it for tangible money. Fintech will benefit from the introduction of the Digital Rupee. The finance minister also stated that the Central Bank Digital Currency (CBDC) will promote the digital economy significantly. According to Sitharaman, digital currency would lead to a more efficient and cost-effective currency management system that will use blockchain and other technology. The digital currency will also be accepted for digital, online, and retail purchases, according to the PM. In the latter case, he believes retailers will benefit from lower cash handling costs.
There were no specifics about how people or businesses would manage payments. Modi also failed to explain how a more intriguing promise – that the digital rupee will make it easier to create a worldwide digital payment system – would be carried out. The Reserve Bank of India, which will be in charge of implementing the digital rupee, has remained mute on that aspect of the currency since its initial announcement. What is digital currency? The central bank's digital money is legal tender in digital form, as the name implies. Digital money is identical to a fiat currency and may be exchanged for it one for one. Its only difference is in its appearance. On a central bank's balance sheet, it appears as a liability or currency in circulation. With the advent of digital payment methods, digital currency is predicted to become a more convenient alternative to actual cash.
The Finance Bill proposes amending Sections 2 and 22 of the RBI Act, 1934, to clarify that CBDCs will be considered banknotes as well. Difference between digital currency and cryptocurrency- A central bank issues a digital currency, but cryptocurrencies like Bitcoin and Ethereum are private and have no issuers. Rabi Shankar (RBI head) had previously stated, "They are not commodities or claims on commodities because they have no intrinsic worth." In addition to being unregulated and decentralized, private cryptocurrencies are notoriously volatile. A CBDC, on the other hand, will have the same value as physical cash and will be created and controlled by the central bank. But, blockchain technology underpins both the Digital Rupee and private virtual currencies.
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