What is e-Rupee or Digital Currency of RBI ? How is it different from crypto currency?

e-Rupee or Digital Currency of RBI

The Reserve Bank of India is set to launch the pilot of its central bank digital currency (CBDC), which it categorizes as legal tender in a digital form. Commonly known as the digital rupee, it will be exchangeable at par with existing currencies and will be considered acceptable for payments and a safe store of value. 

Also being called the e₹ or the digital rupee, CBDC issued by the RBI is aimed at creating an additional option to use money and isn’t very different from the currently-issued banknotes; only the digital rupee is expected to be transacted digitally and facilitate ease of use. 

A central bank digital currency, such as the e-Rupee, is a digital representation of a country’s fiat currency issued and regulated by the central bank. It aims to provide a secure and efficient means of payment while maintaining the stability of the financial system. CBDCs typically utilize blockchain or distributed ledger technology to ensure transparency, security, and immutability.

While the RBI has been actively studying the feasibility and potential benefits of a CBDC, no official announcement or launch has been made as of my knowledge cutoff. It’s advisable to refer to the latest news and updates from the RBI or other official sources for the most current information regarding the e-Rupee or any digital currency initiatives in India.

The digital rupee is the RBI’s accepted version of cryptocurrencies, which the central bank has dismissed repeatedly and called a serious challenge to the stability of the financial system of the country. 

How is e-Rupee different from crypto currency?

The e-Rupee, or a central bank digital currency (CBDC) issued by the Reserve Bank of India (RBI), and cryptocurrencies are distinct in several ways:

Authority and Regulation: The e-Rupee is issued and regulated by the RBI, which is the central bank of India and operates under the authority of the Indian government. Cryptocurrencies, on the other hand, are typically decentralized and not issued or regulated by any central authority or government.

Legal Tender: The e-Rupee is a legal tender in India, meaning it is recognized as a valid form of payment by the government. Cryptocurrencies, such as Bitcoin or Ethereum, are not legal tender and their acceptance as a means of payment depends on the parties involved in a transaction.

Centralization vs. Decentralization: CBDCs like the e-Rupee are centralized systems where the central bank maintains control over the issuance, distribution, and regulation of the digital currency. Cryptocurrencies are decentralized, often based on blockchain technology, where transactions are verified and recorded by a network of participants rather than a central authority.

Technology: CBDCs, including the e-Rupee, are typically built on centralized databases or distributed ledger technology that allows the central bank to maintain control over the currency supply and transactions. Cryptocurrencies utilize decentralized blockchain technology, which offers transparency, security, and immutability through consensus mechanisms.

Stability: CBDCs, like the e-Rupee, are designed to maintain stability in the financial system and may be pegged to the national currency or operate on a similar monetary policy framework. Cryptocurrencies are known for their volatility and can experience significant price fluctuations due to market demand and speculative trading.

It’s important to note that the details of the e-Rupee, including its specific features and technological implementation, have not been officially announced as of my knowledge cutoff. Therefore, any forthcoming e-Rupee might have unique characteristics that would need to be evaluated to understand its differences from cryptocurrencies more precisely.

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