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

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Original Source: The Indian Express

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.

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