#54: CBDC (e₹) | UPSC relevant info
Blockchain based Digital Currency is now rolling!
Indian Central Bank Digital Currency is set to take off. This post will teach you everything about #CBDC (e₹) for #UPSC 👇🧵
Source: @BahlKanan and Indian Express
What is CBDC?
- Liability on RBI
- Same as fiat currency
- A legal tender by RBI in digital form
- Fungible legal tender i.e. no bank a/c needed to hold e₹
Features
- P2P or P2Merchant transaction(s)
- Withdrawal from bank same as notes
- Lower cost of issuance vis-a-vis note
- Low risk of 'note' being torn or stolen
- "Bearer instrument" like banknote i.e. holder is assumed to be owner
How is CBDC diff from UPI?
- CBDC is substitute of cash, UPI is not
- No limit of transaction, 2 lac+ e₹ to be reported for taxes
- No time required for settlement among banks
- No bank account needed (UPI works on bank a/c)
Benefits of CBDC
For public
- Transparent & efficient system going towards $1tn digital economy
- Bank deposits secured up to 5 lac, e₹ is 'legal tender' i.e. every penny to be returned to 'owner'
For govt.
- Environment friendly
- Tech advancement by leveraging blockchain
- Lower physical cash management cost(s) [print, store, transport etc.]
Others
- Promote Financial Inclusion
- Improved cross-border payment scenario
- No settlement risks/delays (among banks)
- Reduced threat from geopolitical turbulence
- Ability to trace digital money will ensure end user utilization for govt (as subsidies, grants or aids)
Things to keep in mind
- Cyber security mechanism
- Bank deposits earn you interest, CBDC won't
- Loss of bank revenue on maintenance, settlements etc.
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