Digital Rupee: What is Digital Rupee? How is it different from UPI and Bitcoin? Know its ABCD..
By the year 2025, many major economies of the world have moved towards Central Bank Digital Currency (CBDC). India is also not behind in this race. While China has been the most aggressive in this matter, India's Digital Rupee is now preparing to come out of testing and gradually reach the pockets of the people. Although RBI is still describing it as in "pilot mode", but despite this, more than 15 big banks in the country are getting it used through apps to reach the Digital Rupee to the people.
Has Digital Rupee been launched? Can it be used?
Yes, the retail version of Digital Rupee was launched in December 2022. Along with this, a separate system was also started for wholesale transactions. However, RBI is still looking at it as a pilot. Neither any interest is available on the Digital Rupee nor any transaction fee is charged. It is completely based on the guarantee of the government. Just like you use cash.
Currently, 15 banks like Axis Bank, SBI, and HDFC are testing digital rupee apps. Some of these apps are directly linked to UPI, but it is a completely different system from UPI.
What is the advantage of Digital Rupee?
RBI is presenting it as a real-time, seamless, and reliable payment system. But despite this, by the end of 2024, its use has been only 0.006% of the total cash in the country. That is, people have not adopted it.
Why is UPI being compared with Bitcoin?
UPI is the most popular digital payment system in India today. Whatever payments people make through apps like Google Pay, PhonePe, and Paytm, are all based on UPI. In such a situation, the question arises that if UPI is so successful, then what is the need for the digital rupee?
The same is happening in China. There is a digital currency called e-CNY, but people still use WeChat Pay and Alipay more. The same trend is seen in India as well.
Talking about Bitcoin, it is neither linked to any country nor any one currency. It is completely open-source and the government has no control over it. On the other hand, RBI completely controls Digital Rupee.
Will the Digital Rupee affect privacy?
This is a big question. RBI has not yet clarified the technical details related to Digital Rupee. For example, there is not much information in the public domain on how much tracking is done in it, how much user data is stored, or who is buying what. Because of this, many people believe that through Digital Rupee, the government can keep a closer eye on people's spending habits.
India's view towards digital control
This is also a matter of debate. The way RBI is promoting it, it seems that this is a solution that was prepared earlier, and now problems are being found for it. As its testing is progressing, some practical problems are coming to the fore. For example, transactions in it are possible only in fixed denominations, which is a limitation. History also shows that India's view has been towards digital control.
India has made big decisions regarding cash many times before. The biggest example of this is the demonetization in 2016 when 500 and 1000 rupee notes were banned. At that time also it was said that this would stop black money. Now a similar thinking is being seen regarding Digital Rupee, where the government wants more control over transactions. And if this Digital Currency becomes popular in the future, then RBI can probably push people more to use it.
Will RBI take it to the international level?
At present there is no major indication of this. While China is testing e-CNY for international transactions, India is still using the Digital Rupee only for domestic transactions. The Digital Rupee is currently a new experiment. How much will its usage increase, will it be able to compete with UPI, and will people trust it, only time will tell.
For now, it can be said that this effort of RBI is another step towards making India's financial system more digital and controlled. But what is special in this for common users, the answer to this is still unclear.
