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What Is Digital Currency?
Any currency that is only offered in electronic form is considered digital currency. Many countries' financial systems already heavily rely on electronic forms of currency. However, digital currency can only be exchanged virtually and never leaves a computer network.
Cryptocurrencies, central bank digital currencies (CBDCs), and stablecoins are the three main types of digital currency.
Blockchain technology, the most common type of distributed ledger utilised by digital currencies, provides the basis for cryptocurrencies. CoinMarketCap estimates that there are more than 21,000 cryptocurrencies available.
What Is Cryptocurrency?
CA cryptocurrency is a form of digital money that is created and managed through the use of advanced encryption techniques known as cryptography. Cryptocurrency is not issued by any government or central bank and therefore is not subject to the same regulations as traditional currencies.
Cryptocurrencies are based on a decentralised ledger system known as a blockchain, a shared public ledger that records all transactions. Cryptocurrencies are used for a variety of purposes, including buying and selling goods and services, sending money to friends and family, and trading on financial markets.
CryptoCurrency v/s CBDC
In contrast to cryptocurrencies, a CBDC is not a commodity, a claim on a commodity, or a digital asset. The cryptocurrency's creator is not present. They are not money (certainly not currency), as the term has come to be used historically, according to the RBI statement.
The CBDC is the digital equivalent of paper money issued by central banks like the RBI, and it should be exchangeable for cash. The RBI-created digital rupee will have the same functions as the widely used digital rupee, but it won't be a decentralised asset like cryptocurrencies. The central banks in charge of supervising and managing the asset would create the currency known as the "digital rupee."
CBDC Launched In India
India has recently launched its first digital currency, Central Bank Digital Currency (CBDC). This new digital currency is a form of a digital currency issued by the Reserve Bank of India (RBI) and is the first of its kind in India.
The purpose of the CBDC is to provide a secure, reliable, and convenient payment system for Indian consumers and businesses. With this new digital currency, the RBI will be able to monitor and control the monetary supply, as well as to ensure that the value of the currency is stable. The CBDC will also be used to reduce the cost of transactions and to facilitate the transfer of funds between individuals and businesses.
The launch of the CBDC marks an important step in advancing India’s financial system. The CBDC will provide a platform for Indian citizens, businesses, and government agencies to transact with each other securely and reliably Moreover, the CBDC will help to reduce the cost of transactions and to increase the efficiency of payments.
The CBDC is based on distributed ledger technology (DLT), which is a form of digital ledger that records and stores data securely and transparently. This technology is used to track and store information related to transactions and other activities. The CBDC can be used to transfer funds between individuals and businesses, as well as to track the ownership of assets. It is also used to provide enhanced security for transactions, as it is encrypted and stored on the DLT.
In addition to providing a secure and reliable platform for payments, the CBDC is also expected to help reduce the cost of transactions and to facilitate the transfer of funds between individuals and businesses. It is also expected to help improve the efficiency of payments and to reduce the cost of cross-border payments. The CBDC is also expected to help reduce the risk of fraud and to improve the transparency of financial transactions.
The launch of the CBDC is a major milestone in the development of India’s financial system. With the launch of this digital currency, the RBI will be able to monitor and control the monetary supply, as well as to ensure that the value of the currency is stable.
Furthermore, the CBDC will help to reduce the cost of transactions and to facilitate the transfer of funds between individuals and businesses. This will help to improve the efficiency of payments and to reduce the cost of cross-border payments. Finally, the CBDC will help to reduce the risk of fraud and to improve the transparency of financial transactions.
Written by- Hanshu Varandani
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