What is Digital Rupee
The country's Union Budget was presented on February 1, 2022, in which Finance Minister Nirmala Sitharaman has spoken about digital currency in her budget speech. The finance minister has made a big announcement about the RBI's digital currency during his budget speech.
The Finance Minister said that the RBI's digital currency 'Digital Rupee' will be launched at the beginning of the new financial year (FY 2022-2023).
In this blog, we will talk about digital currency and the digital rupee.
What is Digital Rupee or CBDC?
The Reserve Bank of India (RBI) defines the Central Bank Digital Currency (CBDC) as a legal tender issued digitally by the Central Bank. In simple words, Digital currency is the digital (electronic) form of Fiat currency. Digital currency is also fungal with physical currency. The digital rupee will be issued by the Reserve Bank of India (RBI).
What is the use of Digital Rupee?
All the benefits of the digital rupee that we see with cryptocurrency as well as digital payments. To begin with, digital currency can never be torn, burned or physically damaged. They cannot be lost physically. Compared to notes, the lifeline of digital currency will thus be uncertain.
The Union Budget 2022 document said that the introduction of CBDC will give a major boost to the digital economy. “Digital currency will also create a more efficient and affordable currency management system. Financial Year 2022-23, it is proposed to introduce digital rupee using blockchain technology and other technologies issued by the Reserve Bank of India."
The digital rupee will be of two types - retail and wholesale. Retail digital currency is for the general public and companies, wholesale is for financial institutions.
What is blockchain technology?
It is a digital laser technology (DLT) that is digitized and decentralized. It gives access to a public ledger containing all transactions in the network's system. This is called a block chain because these blocks act as a chain where each block joins chronologically. The new block will have the hash (link) of the previous block.
Blockchain technology will shape the bank's financial transactions throughout history, and one block will be a personal bank statement.
So, the blockchain will contain records of the most recent transactions from the first transaction (first block) of the applicant.