Every country is taking some initiatives to advance its technological aspects and financial market. India is planning to match the steps as well. RBI, India’s central bank, is launching a pilot project to boost the financial sector. The institute launched a digital rupee, the first of its kind in the nation.

The digital rupee or currency will enhance your user experience in contactless transactions. This electronic money will help you in contactless transactions and users will gain experience like never before. This pilot project made its way to the market on 1^st November this year. Read this blog to find out more about what a digital rupee and the project are all about!

What’s In This Pilot Project?

This digital rupee will be backed by RBI and the project was launched for the wholesale sector. Apart from this, RBI will launch a project for the retail sector soon. The authorities will launch this project in selected locations. It will be for special groups that will consist of merchants and consumers.

Around 9 banks will be able to participate in this project as the wholesale sector. These are SBI, HDFC, Yes Bank, UBI, and others. But, the starting phase included around 4 major banks like SBI, ICICI, and certain others. Other remaining banks will join the pilot project at different stages of the project.

According to the plans of this project, it will spread in different amounts across the nation. And, different banks will eventually join this project.

What Is This Digital Rupee?

This new digital rupee or CBDC is a kind of digital currency that is backed by RBI. Unlike other digital currencies such as Bitcoin or Ethereum, this coin will be backed by the Central bank. But, you can use it for everyday transactions which will be contactless.

The news of this launch was announced in this year’s Union Budget by the Finance Minister of India. She announced that RBI will release the pilot project soon.

And, this CBDC is of two forms, which are, CBDC-R and CBDC-W. CBDC-R or the Retail one can be used by everyone. While CBDC-W or Wholesale is for certain definite institutions. The central bank has certain limitations on its usage and only the selected financial institutions can use it.

Is Digital Rupee the Same Like Crypto?

If you are thinking that both aspects are the same, then you need to hear the differences between the both. Though both of these may sound pretty similar, there is a sharp difference between CBDC and Crypto.

In the case of Cryptocurrencies, they operate on the Blockchain network and are decentralized. These digital currencies are not under any regulation, which is the reason behind certain controversies as well.

In maximum nations, Cryptos are not legal tender. And, investors may face a huge amount of loss without any way to revive the same. This makes Cryptocurrencies a less reliable option with a high amount of risks.

But, CBDC or RBI’s Digital Rupee will be backed by the Central bank itself. And, it will be a legal tender in the nation. With this, people can use it without any fear of loss or risk!

The Director and Founder of Proassetz Exchange, Manoj Dalmia, says that this digital rupee is different from BTC or ETH. , it is different from any Cryptocurrency because it is government-backed. And, as it is backed by the higher authorities, it will have attached values with it. This intrinsic value will make a digital rupee equal to physical currencies.

Advantages Of Using Digital Rupee

This new step has come along with many benefits for the users and the government as well. These are-

Reduction In Transaction Cost:

By using the digital rupee, you can cut down on extra costs and pay the exact amount.

Easy To Track The Transactions:

When citizens will start using digital currencies, it will become easier for the government. The authorities will have an access to all the transactions’ information.

No Fear Of Damage:

As you will not be holding physical currencies, the fear of getting your notes burnt or torn will not exist.

Conclusion

This innovative step by RBI will be worth watching. And, time will tell us how successful the entire project is! For investment and trading check https://qumasai.org/.