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Central Bank Digital Currency (CBDC)

Cyber Blockchain Club

发布日期: 2023年2月11日

Introduction

The Central Bank Digital Currency (CBDC) is traditional money in electronic form, issued and regulated by a country’s central bank. Businesses, households, and financial institutions can use CBDCs to manage payments and savings. A nation’s monetary policies, central bank, and trade surpluses determine the supply and value of CBDC. The use of distributed ledger or blockchain technologies in CBDC is based on the requirement.

The RBI has launched pilots of CBDC in both the Wholesale and Retail segments. The pilot in the wholesale segment, known as Digital Rupee-Wholesale (e?-W), was launched on November 1, 2022, with the use case limited to the settlement of secondary market transactions in government securities. The pilot in the retail segment, known as Digital Rupee-Retail (e?-R), was launched on December 01, 2022, within a closed user group. The use of (e?-W) is expected to make the interbank market more efficient, reducing transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk.

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CBDC Vs Cryptocurrency

CBDC is a centralized structure as it is operated by central banks’ blockchain networks. It can be accessed only by financial institutions with privileges.
On the other hand, Cryptocurrency is decentralized.
It is hosted by the public in a permissionless/open blockchain network that anyone can access. With cryptocurrency, users enjoy anonymity, but CBDC promotes transparency and accountability.
CBDC can only be used for retail payments and other financial transactions; however, any form of hoarding or investment activity is forbidden.
Cryptocurrency has no such limitations and can be used for both speculative?

Advantages of the digital currency

Low risk of settlement: According to the RBI, payments made through CBDCs will be final, reducing the risk of settlement in the financial system. Thanks to CBDC, interbank settlement won't be necessary.
Lower transaction costs: Settlement in the currency of the central bank would reduce transaction costs by removing the need for infrastructure for settlement assurance or collateral to mitigate settlement risk.
Liquidity improvement: Compared to existing payment systems, CBDC may offer users advantages in terms of liquidity, scalability, adoption, ease of transactions with anonymity, and speedier settlement.
Increasing digital economy: The digital rupee, which will make online transactions safer and risk-free, will increase the future of the digital economy.
Bridging the gap: CBDC will reduce the need for payment gateways and card networks. India only has 582 million bank accounts despite having 1.2 billion mobile phone connections today. The CBDC may be able to reduce the gap.