How is Digital Currency Different from Cryptocurrency

How is Digital Currency Different from Cryptocurrency | As RBI launches retail digital rupee pilot project today, find out how digital rupees are different from cryptocurrencies and what are their benefits?

Today when RBI will start the pilot project of retail digital rupee, many people are still wondering what this digital rupee is and where it will be used. And why is this different from UPI when it will be controlled by a blockchain that people are comparing with cryptocurrency Know full details.

A pilot project of digital Rs

RBI's digital rupee means a new era of currency has begun in the country. From today, common people will be able to use it in four cities of the country including Delhi. However, people are very confused about this digital currency. People are considering it as cryptocurrency. Although, you may think of them as more or less the same, but fundamentally there is a huge difference between the two.

Where will the project start?

Digital rupee was announced in this year's budget. On December 1, a central bank digital currency (CBDC), called Digital Rupee, has been launched as a pilot project. In the first phase, the project has been launched in Delhi, Mumbai, Bangalore and Bhubaneswar. Consumers and merchants will be able to use digital rupees in these cities. In the second phase, it will be expanded to many other cities as well. But what is digital rupee? This still remains a question for many people. Let us know the simple answer to this.

What is digital rupee?

You can think of this as a digital version of cash and it is initially introduced for retail transactions. Spending it would be like spending money from your wallet. However, it is also quite different from digital wallet or UPI. In future it can be used by all private sector, non-financial customers and businesses. This direct control will rest with the Reserve Bank of India. Simply put, the way you use cash today will remain exactly the same, but in a digital form. e₹-R will be in the form of a digital token and you will be able to use it like coins and notes.

Where will it be used?

Users will be able to use digital rupees through participating banks. They can also be stored in mobile phones and devices. It can be used for both person-to-person and person-to-business transactions. RBI has launched digital rupees in two categories. The bank has introduced it in two forms, general purpose (retail) and wholesale. On November 1, RBI launched the digital rupee in the wholesale segment.

How different is it from cryptocurrency?

A question also comes to mind whether digital rupee is also a cryptocurrency. Cryptocurrencies are basically decentralized digital currencies. That is, it is not controlled by any single bank or organization and is managed through blockchain. Whereas Digital Rupee which has been launched by RBI is a centralized digital currency. It will be controlled by the Central Bank. That is, it is a digital form of current currency.

What are its benefits?

The Reserve Bank of India had initially said that the main objective of exploring digital currencies was to reduce operational costs in physical cash management. Apart from this, digital rupees can be used to reduce online fraud. Along with this, it will also help prevent people from moving to private cryptocurrencies.

While private cryptocurrencies are volatile, this is not the case with digital rupees. In this you will find the same stability as the rupee. It was issued at the same price as our rupee today. People will also be able to convert digital rupees into physical cash. RBI will control its circulation.

Which banks are involved?

8 banks will be involved in this project. Initially four banks State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank are part of this pilot project. Later, Bank of Baroda, Union Bank of India, HDFC Bank and Kotak Mahindra Bank will also join the project.

 

How is Digital Currency Different from Cryptocurrency