If the Digital Rupee can be evolved to mimic all the functionalities of private cryptocurrencies while ensuring the ‘risk-free’ guarantee of the sovereign, it can indeed prove to be an attractive alternative.
Victor Saha, Assistant Professor, Jindal Global Business School, O.P. Jindal Global University, Sonipat, Haryana, India.
Sunil George Mathew, Assistant Professor, Jindal Global Business School, O.P. Jindal Global University, Sonipat, Haryana, India.
United Payments Interface (UPI) is hailed as one of the greatest innovations that has come out of India. Its ability to support both retail payments and remittances, ease of usage, and interoperability has provided a huge impetus to India’s digital inclusion initiatives. Its success can be gauged from the fact that transactions in volume using UPI has already crossed the trillion-dollar mark in 2022. Since its launch in 2016, it is the first time that UPI’s transaction volume has surpassed the trillion-dollar mark. Countries such as Japan, South Korea, France, and many others have already adopted India’s UPI payment system. This just shows the growing popularity of UPI not just in India but also around the world.
But then, why is RBI coming up with Digital Rupee when UPI is already so successful and popular?
Before we answer this question, let us first understand what a Digital Rupee really is about.
What is a Digital Rupee?
RBI defines Digital Rupee, also known as Central Bank Digital Currency (CBDC), as a legal tender issued in digital form. Put simply, Digital Rupee is the digital form of our currency notes. It would function just like the paper currency notes, and hence, can be used as a medium of payment, as a legal tender, and as a store of value. However, you cannot redeem your Digital Rupee in the form of physical cash! That is, if you have Rs. 1000 in the form of Digital Rupee in your digital wallet, you can use this money only for digital transactions; but you will not be able to redeem this amount in the form of physical cash from any bank or ATM.
Published in: BW Businessworld
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