Home Future payments 10 reasons why the digital rupee is the future of money

10 reasons why the digital rupee is the future of money

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The Reserve Bank of India (RBI) has announced that the first pilot of the Digital Rupee – Retail segment is expected to launch within a month in select locations. The central bank said nine banks – State Bank of India (SBI), Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC – have been identified for participation. to the pilot project.

Livemint spoke to experts about why the digital rupee is the future of money

1) Centralized

Central Bank Digital Currency (CBDC) – a new form of digital currency issued by central banks – may well be the new infrastructure we need to build more trust, resilience and efficiency.

Manoj Dalmia, Founder and Director of Proassetz Exchange, said that the money will be in virtual form just like other cryptocurrencies, but the digital rupee will not be decentralized but will be regulated by the Reserve Bank of India (RBI ). The digital rupee will be completely legal and acceptable to the Indian government.

2) Ease of use

Pranav Arora, Managing Director and Head – Applied Intelligence, Accenture in India, said each CBDC unit can be uniquely identified and traced. Second, it could be made programmable, i.e. it is possible to add several dimensions such as prescribed end uses, time limit and transferability. Finally, the CBDC is recorded on distributed ledgers powered by the blockchain, which allows all participants/banks to record transactions and balances.

Taken together, these three differentiating characteristics — identifiability, programmability, and distributed ledgers — can unlock a whole new set of economic possibilities, Pranav Arora added.

3) Worldwide Acceptance

There will be no more geographical limits with the internationalization of current and financial account transactions. “A digital rupee that can be held by non-residents and available for cross-border financial transactions seems a natural extension to enable new retail payment opportunities and new businesses,” said Pranav Arora.

4) Transparency

“The launch of the digital rupee in India should usher in more efficiency, transparency, systemic resilience and governance in our currency management system,” said Pranav Arora.

“RBI data shows that between 2018 and 2020, Indian banks lost around $50 billion to fraud. According to a CVC report, one of the main reasons for the top 100 cases of fraud is the improper end use of loaned funds. While the current system relies on post-clearance checks such as CA audit reports and inventory statements, etc., a digital currency could proactively address these issues with installed programmability and regulated traceability,” said Dalmia.

5) No bank account needed like this for UPI

Anup Nayar, CEO of In-Solutions Global Ltd, said one of the main advantages of the move is that you don’t even have to open a bank account to transact.

6) Payment via Digital Currency or Rupee will be in real time

Once the digital rupee is launched, the government can easily access all transactions within authorized networks, enable real-time account settlements and ledger maintenance, Nayar said.

7) Likely to save operational costs of ticket printing, distribution and storage

According to Anup Nayar, digitized currency will minimize costs related to printing, distribution and cash logistics management.

“Not only will the rollout reduce reliance on cash, but it will remain mobile forever unlike banknotes,” Nayar added.

“India’s propensity to cash of 17%, the ratio of money withdrawn to GDP, is higher than that of Nordic countries, such as the UK and Australia. Switching to digital payments and digital currency could reduce reliance on cash,” Manoj Dalmia said.

8) Governments can access all transactions made within authorized networks

Anup Nayar is of the opinion that the adoption of the digital rupee is also likely to play a pivotal role in allowing easy control of Direct Profit Transfers (DBT), making them relatively faster and reducing malpractices in the payment system. Increasing the efficiency of digital transactions will surely add another dimension to digital governance.

9) Cannot be physically damaged or lost

Archit Gupta, founder and CEO of Clear, said the advantage of digital currency is that it is not torn, burned or physically damaged. They also cannot be physically lost. “The lifeline of a digital currency will be indefinite compared to physical banknotes,” he added.

10) Fraud
The digital rupee can help prevent fraud. Pranav Arora said that while the current system relies on post-clearance audits to prevent fraud, the CBDC could proactively address this with built-in programmability and regulated traceability.

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