Countries such as the UAE, El Salvador and Central African Republic have been welcoming cryptocurrencies for digital transactions, while most countries remain apprehensive. China is among countries which have banned crypto, while its digital Yuan to counter Bitcoin and Ethereum will remain in pilot phase till next year. Although India hasn’t been clear on the legality of cryptocurrencies despite taxing profits from crypto trading, RBI had issued a concept note for a digital Rupee to be launched on Thursday, December 1.
Design and issuance mechanisms unveiled
The Indian banking regulator has announced that it will be launching a pilot of the virtual version for the Rupee in Mumbai, New Delhi, Bengaluru and Bhubaneshwar. Aimed at strengthening digital transactions in India, the new currency called e₹ will complement the existing payment methods instead of replacing them. Seeking to launch the CBDC this year, RBI has mentioned design choices, issuance mechanisms and use cases for the e₹ in its concept notes.
Further, it has been revealed that the e-rupee will be a digital twin of the currency notes and coins which are already being used for daily purchases.
The legal tender will be available through payment wallets made available by eight banks, including ICICI, SBI, Yes Bank and Bank of Baroda among others. Just like any payment app, e-rupee will be used for transactions between two users or between users and mechants.
Global central banks counter crypto
The Central Bank Digital Currency (CBDC) is the equivalent of a fiat currency, which is backed by the central bank of a country and is stored digitally. Apart from China, Nigeria, Bahamas, Grenada, and Dominica have also launched digital currencies, while Thailand, UAE, Malaysia, Saudi Arabia, South Korea and Russia have CBDCs in the pilot phase. To compete with cryptocurrencies, a digital Euro is also being developed, as the former have been deemed volatile due to fluctuations in value.
Same as crypto or better?
The e-rupee primarily has been designed for day to day transactions, as opposed to crypto which is more of an investment vehicle now. Cryptocurrencies are private virtual assets, which represent a debt and aren't issued by any particular body, while the e-rupee is a CBDC backed by RBI.
Most importantly, the e-rupee is a lot more stable, since it will be regulated by India's central bank, and will also be protected from fluctuations in the crypto market.
RBI’s strong stand against cryptocurrencies
RBI governor Shaktikanta Das has criticised crypto due to the lack of an underlying, which is an asset that guarantees the value of a currency. He has even gone on to say that the virtual assets draw their value from make-believe instead of anything concrete. The banking regulator has been consistent with its demands for a ban on cryptocurrencies in India, even as 10 crore out of 30 crore crypto owners globally are from India.
In the absence of a crypto regulation, Indian investors have lost Rs 1000 crore to fake exchanges, while legitimate Indian crypto exchanges have lost 75 per cent trading volume, since taxes were imposed on the digital asset’s trade.
