Digital Currency in India or Digital Rupee also known as eINR or E-Rupee. Which is similar to sovereign paper currency and is issued in digital format by the Reserve Bank of India. This Digital Currency In India was proposed in January 2017 and it was launched in the year of 1 December 2022. The first digital currency is known as Bitcoin (BTC). This Digital Currency is one of the revolutions in the payment industry which has witnessed a revolution through digital business models and innovative systems.

Some Important Types of  Digital Currency in India are 

• Cryptocurrencies - It is Digital Currency which is an alternative form of payment created using encryption algorithms.

• CDBC - It is a form of digital currency that is issued by the country's central bank. That promotes financial inclusion and simplifies the implementation of monetary and fiscal policies.

• Virtual Currencies - Virtual currencies are also one type of digital currency in  India that is issued mainly by private parties such as groups of developers or organizations.

• Stable Coins - This refers to a digital currency or asset that preserves its value consistently against a designated external traditional asset class.

These are the important forms of digital currency in India nowadays which are mainly used for faster payments, borderless transfers, Instant transactions, etc.,

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Indian Digital Currency

• 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 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 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 Eight banks in India.

• In that, Four banks namely 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, and Bhubaneswar 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. Download the pdf which is added to this article.

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 the 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.

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 by RBI advance India in the race for virtual currencies. And, of course, since cryptocurrencies are becoming more and more important.

• The 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 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 Indian digital currency 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 to 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 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 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.