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Economy
Mahesh

22/07/22 16:32 PM IST

Phased implementation of digital currency for wholesale, retail segments in the works

In News
  • The Reserve Bank of India (RBI) is in the process of implementing the Central Bank Digital Currency (CBDC) in a phased manner for wholesale and retail segments.
Advantages 
  • For social benefits and other targeted payments in a country
  • CBDCs could be used for faster cross-border remittance payments.
  • Inclusive development: universal access attributes of a CBDC could also include an offline payment functionality, thus helping bridge the digital divide.
  • Instant lending to micro, small, and medium enterprises (MSMEs)in India can be possible with the help of CBDC.
About CBDC 
  • A Central Bank Digital Currency (CBDC), or national digital currency, is simply the digital form of a country’s fiat currency.
  • Instead of printing paper currency or minting coins, the central bank issues electronic tokens. This token value is backed by the full faith and credit of the government.
  • CBDC is not comparable with private virtual currencies or cryptocurrencies. It will be a sovereign-backed digital currency.
Challenges 
  • Potential cybersecurity threat.
  • Lack of digital literacy of the population.
  • Issue with regulation, tracking investment and purchase, taxing individuals, etc.
  • Threat to Privacy: The digital currency must collect certain basic information about an individual so that the person can prove that he’s the holder of that digital currency.
Source- The Hindu 

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