Future of money?

Slow but steady, India appears to be moving towards a digital currency

- SHUBHANGI SHAH

UPI (UNIFIED PAYMENTS Interface) is the preferred method of transaction in present times, whether while paying a vegetable vendor or making a big transaction. The success of UPI shows the allure of digital means when it comes to money. Can CBDC (central bank digital currency) become the future of money?

Testing the waters and taking one step at a time, the Reserve Bank of India (RBI) on November 1 launched India's first digital rupee pilot project for wholesale. The same for the retail segment will be launched soon.

To understand what a digital rupee is, it is crucial to know the central bank digital currency or CBDC. Inspired by cryptocurrencies and stablecoins, CBDCs are digital currencies issued by a country's central bank. It makes the digital rupee the digital currency of India. It is exactly like a banknote but in a virtual form.

In the words of the Reserve Bank of India (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."

These digital currencies can be transacted by using wallets, which are backed by Blockchain, the same technology considered critical to the cryptocurrency landscape. Not just that, these digital currencies backed by the country's central bank can be exchanged for physical currency.