FAQs about Digital Rupee launched by RBI
Will Digital Rupee be useful in retail payments?
“CBDCs or Digital Rupee can also be used for retail payments. Payment instruments could be made available for payment transactions to be made via CBDC. Retail CBDC distributed by the RBI and commercial banks would have to be held in electronic wallets/ accounts by the end users,” says Sharma.
Digital Rupee would enable payment means between the following:
- Consumer to consumer
- Consumer to business and
- Business to business.
Will Digital Rupee replace physical currency?
Digital Rupee will not replace physical currency. It is meant to complement physical currency.
“Digital currency advocated by the central banks is to complement and not replace the current forms of money and will provide users with an additional way of payment, with the existing payments systems still being in place. The digital rupee ideated by RBI will be generated through an advanced payment system which is affordable, accessible, convenient, efficient, safe, and secure and will further bolster,” says Rachit Chawla, CEO, Finway FSC.
Will Digital Rupee boost lending?
Instant lending to micro, small and medium enterprises (MSMEs) in India can be possible with the help of CBDC. As more MSMEs use CBDC, banks can draw up a more accurate borrower risk profile. This can be used to promptly meet MSME financing requirements. Moreover, the stimulus for MSMEs can also be disbursed quickly from the central bank. This can help businesses grow and sustain themselves during periods of uncertainty where the availability of cash is limited.
Will Digital Rupee transactions be traceable?
Digital Rupee transactions will be traceable. Experts say that CBDC’s traceability may help retail users and MSMEs prove their creditworthiness.
Will Digital Rupee be based on blockchain?
Experts say that the CBDC for retail would likely be on a Distributed Ledger Technology and not necessarily the blockchain.
“There would be a transparent overview of transactions between participants. The automation ability and instant settlement will help speed up the overall financial infrastructure on which retail payments operate,” Arjun Khazanchi, Co-Founder and Chief Legal and Strategy Officer at Rooba.Finance
Will Digital Rupee have private keys like cryptocurrencies?
There are some concerns about the private keys of the Digital Rupee and the risks associated with losing a private key. However, it seems likely that Digital Rupee would not be based on a self-custodial model.
Will Digital Rupee be exchangeable with cash?
Experts expect there would be fungibility of the CBDC with cash for retail. This would make it an opt-in opt-out kind of system.
Will Digital Rupee help in tax collection?
Digital Rupee may make it easy to collect taxes through smart contracts.
“There are also interesting ways for the tax to be collected through smart contracts linked to the CBDC, but there are various other developments in law, policy and education which would be required before a full retail rollout,” says Khazanchi.
This article is published by FinancialExpress
