Digital Currency is a new type of currency that is issued by the Reserve Bank of India (RBI). Digital currency is also known as the Digital Rupee. It is a currency that is in digital form instead of physical form.

This digital currency was introduced in December of 2022 and was called the Digital Rupee or eRupee (electronic money), which is issued by the Reserve Bank of India (RBI).

The initiative is part of a comprehensive strategy by the Indian government and the Reserve Bank of India (RBI) to modernize the financial landscape and promote financial inclusion while also advocating for the use of digital currency instead of cash.

This article on digital currency in India discusses the Indian digital currency, new digital currency in India, banks, list of banks and cities that launched digital currency in India, meaning of digital currency, difference between digital currency and cryptocurrency, how to invest in cryptocurrency, main objectives of digital currency in India, List of Digital Currencies in India Types, Countries That Are Considering Digital Currency and with their advantages and features. A PDF format is attached with this article. For any queries, check the FAQ section given below.

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Indian Digital Currency

The other name for Indian Digital Currency is Digital Rupee.

• The closed user group (CUG) consists of participating customers and retailers.

• The e-R would take the shape of a digital token that stands for Indian Digital Currency.

• The same denominations that coins and paper money are currently dispensed in would apply to it.

• It would be dispersed through intermediaries, primarily banks.

• Users will be able to transact with e-R using a digital wallet given by the partnering banks and maintained on their mobile phones or devices.

• It is possible to conduct both person-to-person (P2P) and person-to-merchant transactions (P2M).

• QR codes that are displayed at retail places can be used to make payments to retailers.

• The e-R would provide the characteristics of actual money, such as trust, safety, and finality of settlement.

• Like cash, it won't accrue interest and can be changed into other kinds of payment, like bank deposits.

New Digital Currency in India

The pilot will evaluate the sturdiness of the production, distribution, and real-time retail use of the New digital currency.

• Based on the lessons learned from this pilot project on new digital currency, the various features and uses of the e-R token and architecture will be tried in subsequent pilots.

• The settlement of secondary market transactions in government securities is the use case for this experimental project.

• With the launch of India's new digital currency, the interbank market should become more efficient. By eliminating the requirement for infrastructure to support settlement guarantee systems or for collateral to decrease settlement risk, settlement in central bank money would lower transaction costs.

Banks and Cities Launched  Digital Currency

The digital currency was launched in fifteen banks in India.

• In that, four banks, namely the State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank, will start the first phase in four locations throughout the nation.

• Following that, this pilot will include participation from four other banks: Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank.

• Mumbai, New Delhi, Bengaluru, Bhubaneswar, and Chandigarh would be the first four cities the pilot would cover.

• Later, Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna, and Shimla would be included.

• The new digital currency reach may gradually increase as necessary to incorporate additional banks, users, and locations.

Government Banks in India

What is Digital Currency?

Digital Currency- It is a term that refers to a specific type of electronic currency with specific properties.

• This currency is not tangible, and it doesn't have any physical form.

• New forms of technology allow for more secure and seamless usage of money transactions.

• This digital currency cannot be handled, stored, or manipulated.

• Consumers and business people can use digital currencies to execute transactions and trades.

Digital Currency Vs Cryptocurrency

• Digital currency, referred to as electronic currency, represents a new age in financial dealings, existing only in electronic format and requiring devices such as computers or smartphones for transactions.

• Cryptocurrency represents a revolutionary change in how we perceive money. In contrast to conventional digital currencies, cryptocurrencies function on decentralized networks that are not governed by any one organization.

History of Banking in India

How To Invest in Cryptocurrency?

In India, cryptocurrency was banned by the Reserve Bank of India in 2018. However, after the Supreme Court set aside the ban, the cryptocurrency market in India skyrocketed. The demand was seen as an opportunity by businesses and startups who launched various crypto platforms to enable investors to buy and sell cryptocurrency effectively. For anyone looking to invest in cryptocurrency, consider the following steps:

• Make an account on a crypto platform or exchange by completing the KYC process and proving your identity.

• Once you are on board, make a crypto wallet where the platform will store all the coins or tokens you buy.

• Connect the digital wallet of the crypto platform to your bank account. This will help you put money in your wallet to buy and withdraw the money when you sell.

• Once you have put money into your digital wallet, you can place an order to buy any cryptocurrency that is listed on the platform. The money will be debited automatically from your wallet, depending on the order value.

• After the transaction, your wallet will show all the coins and tokens you have purchased. You can sell them anytime you want and take out the money from your wallet and credit it into your connected bank account.

Main Objectives of Digital Currency in India

Some important main objectives of Digital Currency in India

• Improvement of payment system resilience and competition.

• Increasing Financial Inclusion

• Meeting future payment needs in an increasingly digital economy.

• Improving cross-border payments.

• Preventing unlawful activity.

• Reduces the risk of theft. 

List of Digital Currencies in India Types

In the concept note, RBI stated, "Given that retail CBDC is a direct obligation of the central bank, it is thought that it can give users access to secure money for payments and settlement. Wholesale CBDC can improve the security and efficiency of financial transaction settlement systems. Considering the potential each of them offers, there may be justification for introducing both CBDC-W and CBDC-R ".

General purpose or Retail (CBDC-R) and wholesale (CBDC-W) are the two categories into which the Central Bank Digital Currency by RBI has been divided.

Countries That Are Considering Digital Currency

Governments and central banks throughout the globe are investigating (some of them have already adopted) the potential of digital money in light of the rising popularity of a cashless or digital financial system.

The Bahamas, Nigeria, Dominica, Montserrat, Antigua and Barbuda, Saint Lucia, St. Kitts, Nevis, St. Vincent, and the Grenadines have already launched their digital currency. 

Russia – As stated by the Russian Central Bank, the initial testing and the whole cycle of transactions for the Digital Ruble have been completed.

China – Plans are for the introduction of the digital Yuan by 2022.

Advantages

The most important reason for launching a digital currency in India by RBI advances India in the race for virtual currencies. And, of course, since cryptocurrencies are becoming more and more important.

• Digital currency in India will become more efficient and transparent thanks to blockchain technology.
  

• Additionally, blockchain will make ledger upkeep and real-time tracking possible.
  

• Both wholesale and retail clients will have constant access to the payment system.
  

• Indian consumers can pay directly.
  

• Lower cost per transaction.
  

• Account settlements in real-time.

• To use a digital rupee, you don't need to create a bank account.
  

• Swift international transfers.
  

• No volatility risk since the RBI will support it.
  

• Users can complete their transactions using a digital wallet stored on their mobile phones or other devices. A QR code will be used to facilitate payments.

• In contrast to paper money, digital currency will always be portable.

Features

In India, there is a query among the people regarding the Features of digital currency. Because of this, it is a most important point that everyone has to know the special features of digital currency in India. Here, we have validated some of the features that the digital currency in India has.

• The central banks that issue CBDC do so under their monetary policies.

• On the balance sheet of the central bank, it is listed as a liability.

• All individuals, businesses, and governmental organizations must recognize it as a legitimate form of payment, legal tender, and a safe place to hold money.

• CBDC is readily convertible into cash and money from commercial banks.

• Holders of CBDC do not need to have a bank account because it is fungible legal money.

• The CBDC is anticipated to reduce the price of money issuance and transactions.

FAQs

Q. When did RBI launch the Digital currency in India?

On December 01, 2022, RBI launched the Digital currency in India.

Q. How do I buy digital currency in India?

For the initial testing in the first phase, RBI has launched the digital rupee to users through four banks, namely the State Bank of India(SBI), ICICI Bank, Yes Bank, and IDFC First Bank. Currently, RBI is testing the pilot in four cities, namely New Delhi, Mumbai, Bengaluru, and Bhubaneswar.

Q. What are the banks to introduce a digital currency in India?

Eight banks have been chosen to launch digital currency in India. Four banks, namely the State Bank of India, ICICI Bank, Yes Bank, and IDFC First Bank, will start the first phase. Bank of Baroda, Union Bank of India, HDFC Bank, and Kotak Mahindra Bank are the other four banks in the next phase.

Q. What are the types of Digital currencies in India?

The Reserve Bank of India has separated the digital currency in India into two types namely General purpose or Retail (CBDC-R) and wholesale (CBDC-W) are the two categories.

Q. What are the advantages of using Digital Currency?

Indian consumers can pay directly with a lower cost per transaction and Account settlements in real-time.