Digital currency pilot project launched by RBI
The Reserve Bank of India (RBI) started pilot launch of Digital Rupee (e₹) on November in the Digital Rupee – Wholesale segment (e₹-W). There are nine banks named State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC have been recognized for participation in the pilot.
The use case for this pilot is settlement of secondary market transactions in government securities.
Benefits of digital currency pilot project:
- Use of e₹-W might be making the inter-bank market more efficient.
- Transaction costs would be reduced by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk due to settlement in central bank money.
- As per the information received by RBI, other wholesale transactions, and cross-border payments will be the focus of future pilots as going forward and based on the learnings from this pilot.
- The first pilot in Digital Rupee – Retail segment (e₹-R) is projected for launch within a month in select locations in closed user groups comprising customers and merchants.
What is Digital Rupee?
- CBDC (Central Bank Digital Currency) is just a different form of currency issued by a central bank than paper (or polymer) and same legality.
- It is sovereign currency in an electronic form and it would reflect as liability (currency in circulation) on a central bank’s balance sheet.
- The fundamental technology, form and use of a CBDC can be shaped for specific requirements. CBDCs should be interchangeable at par with cash.
RBI’s digital currency Vs Crypto Currency:
RBI’s digital currency: RBI’s digital currency or a CBDC is the legal tender issued by a central bank in a digital form. Even it is the similar to a fiat currency and is exchangeable one-to-one with the fiat currency.
Crypto Currencies: Meanwhile other Crypto-currencies like Bitcoin, Ethereum or Dodgecoin are not regarded as an equivalent to legal tenders.
A lot of risks have been associated with private crypto-currencies and volatility in their prices draw it a dicey option for investors.
Conclusion: Indian government and Reserve Bank of India are parallel confirmed that crypto-currencies are not legal in India through this pilot project of Digital Currency.
Question & Answer:
Q1. Who started pilot launch of Digital Rupee (e₹) in the Digital Rupee – Wholesale segment (e₹-W)?
Ans. Reserve Bank of India
Q2. What is the full form of digital currency platform ‘CBDC’?
Ans. Central Bank Digital Currency
Q3. How many banks have been identified for participation in the pilot project of digital currency by RBI?
Ans. 9 (State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC)