Explained: CBDC, the ‘digital rupee’ that RBI could introduce this year, and how it will help

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Published: August 22, 2022

Reports on Monday (August 22) said the Reserve Bank of India’s (RBI) digital rupee — the Central Bank Digital Currency (CBDC) — may be introduced in phases beginning with wholesale businesses in the current financial year.

In her Budget speech on February 1, Finance Minister Nirmala Sitharaman had said that the central bank would launch the CBDC in the financial year 2022-23. RBI, which has repeatedly voiced its opposition to private digital currencies, had proposed to the government in October last year to widen the scope of the paper rupee to include currency in a digital form.

What is Central Bank Digital Currency (CBDC)?

According to the RBI, “CBDC is the legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different.” The digital fiat currency or CBDC can be transacted using wallets backed by blockchain.

About the Foundation

Whilst most CBDC experiments have involved private sector technology providers, the overwhelming majority of these experiments, to date, have not involved participation from other private sector actors. The Digital Pound Foundation is unique in proposing a model whereby the public and private sectors can fully engage in the design, development and adoption of a digital Pound, thus contributing to its successful roll-out and helping drive forward the UK’s transition to a digital economy.

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