Finance Minister Nirmala Sitharaman during her Union Budget 2022 speech made some major announcements related to cryptocurrencies, especially the new tax on crypto income. As most were eager to see if the cryptocurrency makes its mark, the government has gone in another direction by announcing its own digital rupee currency that will be available later this year. Calling it the Central Bank Digital Currency (CBDC), the announcement said that the digital rupee will “boost the digital economy”. So, what is the digital rupee, how does it work and is it different from cryptocurrencies like bitcoin? We’ve got it all covered to make things easier for you to understand.
what is digital rupee
Digital Rupee is basically the digital form of regular currency which we use for daily transactions. You can store money in a digitally secure format. The digital rupee is powered by blockchain technology that makes currency management cheaper, allowing the government to print fewer notes in the future. And since currency operates digitally, its lifespan increases, as you cannot destroy digital forms, or for that matter lose it.
How will Digital Rupee work?
Even though the digital rupee will be powered by blockchain technology, it will be governed and monitored by a central body, which prevents volatility in the currency due to various reasons. And since the digital rupee is another form of fiat currency, it is likely to take digital payments to a whole new level. We still don’t know how the government plans to put the digital rupee into the system.
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Digital Rupee Is Different From Cryptocurrencies Like Bitcoin
The Digital Rupee has all the blueprints of a cryptocurrency. It is based on blockchain technology and seeks to reduce dependence on physical currency for the foreseeable future. However, unlike bitcoin which operates in a decentralized environment, where all data is stored in an elaborate network of computers. Cryptocurrencies like bitcoin are built on the same basis. But when it comes to the digital rupee, the controlling position rests with the Reserve Bank of India (RBI), which will set up its network with other banking entities. Thus, limiting the network reach of Digital Rupee to local bodies and institutions.
We will know more about the Digital Rupee when the government reveals more details, which is going to happen before the end of FY 2022-23.
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