Page 44 - Banking Finance February 2023

ARTICLE

It is the same as a fiat currency and is exchangeable one- RBI' Central Bank Digital Currency (CBDC) will be issued
to-one with the fiat currency. Only its form is different. and controlled by the Central Bank itself, Unlike Crypto
Currencies, which are private in nature.
As per RBI Concept note "e-` or digital rupee will provide
Crypto Currencies are not commodities or claims on
an additional option to the currently available forms of
commodities as they have no intrinsic value whereas
money. It is substantially not different from banknotes, but
Central Bank Digital Currency have as issued by Central
being digital it is likely to be easier, faster, and cheaper,"
Bank.
Crypto Currencies do not represent any person's debt
Features of Central Bank Digital
or liabilities. There is no ISSUER. They are not money
Currency (CBDC): as the word has come to be understood historically.
The features of Central Bank Digital Currency include but Cryptocurrencies focus on decentralisation. They
not limited to: remove the need for a central authority to facilitate
CBDC is sovereign currency issued by Central Banks in transactions. On the other hand, a CBDC, while utilising
alignment with their monetary policy. the transparency and security that block chains provide,
is still entirely centralised. A central bank oversees and
It appears as a liability on the central bank's balance
facilitates the transactions with the help of other third-
sheet.
party organisations.
Must be accepted as a medium of payment, legal
tender, and a safe store of value by all citizens, Unlike crypto currencies, CBDCs act only as a means of
enterprises, and government agencies. transferring value.
CBDCs use a private permissioned block chain network,
Freely convertible against commercial bank money and
while crypto currencies use a permissionless open
cash.
network.
Legal tender for which holders need not have a bank
Users that use cryptocurrency have anonymity when
account.
they make transactions on the network. However,
Expected to lower the cost of issuance of money and
CBDCs will be attached to a person's existing bank
transactions.
account, which will contain their personal information.
Difference between crypto currencies
Why Central Banks of all the countries
and E-rupee
are exploring Central Bank Digital
Central Bank Digital Currency is a digital or virtual currency
Currency?
but it is not comparable to the private virtual currencies like
Crypto Currency that have mushroomed over the last As per survey conducted by Bank of International Settlement
decade. in 2021, 86% of Central Banks were actively researching the
potential for Central Bank Digital Currency, 60% were
experimenting with the technology and 14% were deploying
pilot projects. Followings are the reason why Central Bank
of all over the world including RBI is focused on Central Bank
Digital Currency.

Main Driver is to provide the public with virtual currencies
that carry the legitimate benefits of private virtual currencies
while avoiding the damaging social and economic
consequences of private currencies (Crypto Currencies).
Central banks, faced with declining usage of paper
currency, seek to popularize a more acceptable
electronic form of currency.

38 | 2023 | FEBRUARY | BANKING FINANCE