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India’s Central Bank Digital Currency(CBDC).
India’s Central Bank Digital Currency(CBDC) may change the way of handling money in the future. Still, in India, many people are unbanked. India’s Central Bank Digital Currency (CBDC) Could launch by December. This initiative will support more financial inclusion. CBDC is not a replacement for physical cash or a copy of cryptocurrency. Simply, it is a virtual representation of the country’s fiat money. Central Bank Digital Currency is an electronic version of the current banknotes that cannot be changed or withdrawn.
Features of Central Bank Digital Currency.
1. The Central bank or central monetary authority issues CBDC.
2. CBDCs are backed by the central bank or issuing monetary authority.
3. CBDCs are easily transferable between peers via peer-to-peer platforms.
4. For any application CBDC can be programmed.
5. They are generally accepted as legal tender.
6. The digital money of a central bank is connected to a fiat currency.
Benefits of CBDC.
The first and foremost benefit is financial inclusion. There is no need for a bank account to use CBDC. So, it automatically increases financial inclusion. Secondly, CBDC is more convenient to use in places where handling currency is expensive.
Challenges of CBDC.
The Public can withdraw large amounts of cash at once and buy CBDC, resulting in stress on banks. Users may feel unhappy because if technology meant to be private is centralized through the government, may result in cybersecurity issues.
Difference between CBDC and Cryptocurrency.
Virtual currencies are often known as Cryptocurrencies that are not government-related. But CBDC is a centralized digital currency controlled by a central bank with a blockchain network. CBDCs can only be used for payment, and investing is prohibited. But Cryptocurrency can be used for both financial transactions and speculation.
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Conclusion.
The Central bank has already begun to review the use of CBDCs as a new kind of money. The new payment system of digital currency can be soon available in many nations. China enabled foreign visitors to use digital yuan in exchange for giving passport details to the people’s bank of china for the upcoming winter Olympics. Formerly digital currency has been completely launched in few countries.
