


{"id":34391,"date":"2022-11-01T03:21:57","date_gmt":"2022-10-31T21:51:57","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=34391"},"modified":"2025-04-20T13:10:44","modified_gmt":"2025-04-20T07:40:44","slug":"rbi-launches-first-pilot-project-for-digital-rupee","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/rbi-launches-first-pilot-project-for-digital-rupee\/","title":{"rendered":"RBI Launches First Pilot Project for Digital Rupee"},"content":{"rendered":"<h3><strong>What\u2019s in today\u2019s article:<\/strong><\/h3>\n<ul>\n<li><strong>About India\u2019s Digital Currency Plans<\/strong><\/li>\n<li><strong>News Summary\u00a0<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h3><strong>In News:<\/strong><\/h3>\n<ul>\n<li>The Reserve Bank of India (RBI) recently launched its first pilot project to use central bank digital currency (CBDC) in the wholesale market for secondary trade in government securities (G-secs) beginning November 1.<\/li>\n<li>Within a month, a second pilot project on retail use of the digital rupee will begin in closed user groups.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>India\u2019s Digital Currency Plans:<\/strong><\/h2>\n<h3><strong>About a Central Bank Digital Currency (CBDC):<\/strong><\/h3>\n<ul>\n<li>If a virtual currency (be it a cryptocurrency) is recognised by the central bank it is known as the CBDC.<\/li>\n<li>CBDCs are the virtual or electronic form of fiat currencies (like the Indian rupee). Hence, a\u00a0CBDC is the legal tender issued by a central bank in a digital form<strong>.<\/strong>\n<ul>\n<li>It would appear as a liability on a central bank\u2019s balance sheet.<\/li>\n<\/ul>\n<\/li>\n<li>Many countries are exploring CBDC, with the\u00a0<strong>Bahamian\u00a0<\/strong>Sand Dollar was the first to debut CBDC in 2020, while\u00a0<strong>Jamaica&#8217;s\u00a0<\/strong>JAM-DEX was the most recent.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>India\u2019s approach to virtual currencies:<\/strong><\/h2>\n<ul>\n<li>In 2018, the RBI issued a directive prohibiting banks from providing services to the cryptocurrency ecosystem.<\/li>\n<li>The Supreme Court of India overturned this decision, calling it disproportionate given that such currencies were not prohibited in the country.<\/li>\n<li>A cryptocurrency law &#8211;\u00a0<strong>the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021<\/strong>\u00a0&#8211; that was supposed to be passed last year has yet to be enacted.\n<ul>\n<li>The bill seeks to prohibit all private cryptocurrencies in India.<\/li>\n<li>However, it is expected to promote the underlying technology of cryptocurrency and its uses.<\/li>\n<\/ul>\n<\/li>\n<li>Currently, there is\u00a0no regulation or any ban\u00a0on the use of cryptocurrencies in the country.<\/li>\n<li>In her 2022-23 Budget speech, the Finance Minister of India announced the launch of the\u00a0Digital Rupee &#8211; a central bank digital currency (CBDC) &#8211; from 2022-23.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/vajiramandravi.s3.us-east-1.amazonaws.com\/media\/editor_images\/2022\/11\/1\/12\/49\/18\/6360c87676aff205af2b88c9_OI.PNG\" alt=\"\" \/><\/p>\n<h2><strong>Background:<\/strong><\/h2>\n<ul>\n<li>According to the RBI, e-Rupee can be structured as\u00a0<strong>\u2018token based\u2019 or \u2018account-based\u2019.<\/strong>\n<ul>\n<li>A token-based CBDC is a bearer instrument, similar to banknotes, which means that whoever owns the tokens at any particular time is believed to own them.<\/li>\n<li>In contrast, an account-based system would necessitate the keeping of a record of all CBDC holders&#8217; balances and transactions, as well as indicating ownership of the monetary balances.<\/li>\n<li>In a token-based CBDC, the individual receiving the token proves his ownership of the token is genuine, whereas an intermediary verifies the identity of an account holder in an account-based CBDC.<\/li>\n<li>A token-based CBDC is preferred for CBDC-Retail\u00a0since it is more similar to physical cash, but an account-based system can be considered for CBDC-Wholesale.<\/li>\n<\/ul>\n<\/li>\n<li>The RBI is considering\u00a0<strong>two models for the issuance and management of CBDCs<\/strong>\u00a0&#8211; direct model (single tier model) and indirect model (two-tier model).\n<ul>\n<li><strong>In the direct model<\/strong>, the central bank will be in charge of all aspects of the digital rupee system, including issuance, accounting and transaction verification.<\/li>\n<li>The central bank and other intermediaries (banks and other service providers)\u00a0each play their respective roles under an indirect model.\n<ul>\n<li>Here, the central bank will issue CBDC to consumers indirectly through intermediaries and any claim by consumers will be managed by the intermediary.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>RBI\u2019s announcement and its significance:<\/strong><\/h2>\n<ul>\n<li>The RBI announced that the first pilot in the Digital Rupee or e-rupee in the wholesale segment will commence in G-Secs from November 1, 2022.<\/li>\n<li>The pilot will include 9 banks: State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC.<\/li>\n<li>According to the RBI, the use case for this pilot is settlement of secondary market transactions in G-Secs.<\/li>\n<li>The use case for this pilot is\u00a0expected to make the interbank market more efficient<strong>.<\/strong>\n<ul>\n<li>Settlement in central bank money\u00a0lowers transaction costs\u00a0by eliminating the requirement for settlement guarantee infrastructure or collateral to offset settlement risk.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Based on the learnings from this one<\/strong>, a second pilot project on retail use of the digital rupee will begin in closed user groups within a month. Future pilots will concentrate on other wholesale transactions and cross-border payments.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>RBI launched the digital rupee for wholesale segment to settle secondary market transactions.<\/p>\n","protected":false},"author":5,"featured_media":34392,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-34391","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/34391","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=34391"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/34391\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/34392"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=34391"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=34391"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=34391"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}