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Digital Rupee: What does this blockchain innovation mean in India?

Web Development
On December 1st, 2022, the Indian government created a massive buzz by launching the Digital Rupee Pilot program, helmed by the RBI. During India’s annual Union Budget meeting in 2022, India’s Finance Minister appealed to launch a Central Bank Digital Currency (CBDC) using blockchain technology.
Digital Rupee: What does this blockchain innovation mean in India?

This RBI-issued pilot program will run on a selective basis with a few public and private banks using blockchain technology. Is CBDC a threat to bank runs? Can CBDC pose a threat to cryptocurrencies? What exactly is the Central Bank Digital Currency Pilot Program? This blog will answer all your questions.

Following the footsteps of the Digital Dollar program, the CBDC is an innovative test program run by the Reserve Bank of India using blockchain technology. To begin with, CBDC is the legal tender of a particular country as the central bank in digital form issues it. Since the people of India have evolved into new-age digital UPI transactions, bank officials are optimistic that the new initiative will be widely accepted in a short period of time. Backed by blockchain technology, the digital money will be transferred from one digital wallet to another, much like crypto assets. The digital rupee also enables users to convert their deposits into digital currencies and vice versa. The process is simple: enter the address of the recipient's wallet to send the currency.

The primary SOP of digital currency is to completely demolish the fake currency mafia and help users convert it into any form of money. The official press release by the Reserve Bank of India stated that the pilot will test the robustness of the entire process of digital rupee creation, distribution, and retail usage in real time. Different features and applications of the e-R token and architecture will be tested in future pilots based on the lessons learnt from this pilot. Currently, India has identified eight banks (including mammoths like SBI, ICICI, YES Bank, and IDFC) that will run the pilot in phases.

Role of blockchain technology in Digital Rupee:

The blockchain system is a digitally distributed ledger system built by decentralization technology that stores information digitally in a chain of blocks. Blockchain is the most trusted source in a system that is fraught with decentralization technology and stores information digitally in a chain of blocks.

Much similar to our previous blog on the Digital Dollar using blockchain technology, digital rupees will enable the Reserve Bank of India to monitor and govern every moment without any intermediary support. This trailblazing initiative will curtail third-party charges and provide exclusive privacy to CBDC holders. Being an immutable ledger, blockchain technology paves the way to record transactions and track assets initiated in a business network. However, the blockchain security system thwarts Reserve Bank from completely monitoring the system; as they are stored in a chain of blocks. To access transactions, the decentralization used in blockchain technology can only be countered by the RBI using a centralized or special permission enabler system. The new module to undertake such actions is yet to be confirmed by RBI.

What does this blockchain innovation mean in India?

The world is racing at the speed of light in terms of digital transactions. India’s new CBDC is an open announcement to catch up with the blazing competitors to push the envelope forward and make India a digitally advanced country. With cryptocurrencies becoming more popular by the day, India is aiming to gain an edge in virtual currency utilization programs with CDBC.

"Digital currency is a game changer," said Rachit Chawla (founder and CEO of Finway FSC), extolling blockchain technology as it paves the path for more efficient and transparent digital transactions for the country. The new CBDC will help retail and wholesale customers access the payment system anytime. Through CBDC, Indian users can transfer amounts with no additional (gateway) payments. This enables users to obtain direct account settlements. The new digital currency does not require users to open a bank account to make international transactions.

Conclusion: With countries such as the United States and China still implementing CBDC transactions, India has a greater advantage in skillfully integrating the CBDC to set a standard for the rest of the world. Pathbreaking designs and innovative implementation of strategies are integral to setting a standard in CBDC transactions. With comprehensive knowledge and proper exposure to practical implementations of Web Development, you can be that developer who can put the country on a pedestal. Enrol in AlmaBetter’s Full Stack Web Development with Web 3 program with a 100% placement guarantee to contribute to the betterment of the country as a successful developer.

Bala Ganesh
Content Writer

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