Why tin News?

• RBI plans to launch "easier, faster, and cheaper” central bank digital currency (CBDC)amid speculations of digital currency launch by central banks across the globe.

Why CBDC?

• Reduction in printing and operational costs. CBDC infrastructure is one time investment. Scope for counterfeiting is reduced.
• Homogeneity & promptness of disbursal. Digitization towards a less-cash economy.

Features

• Sovereign currency issued by central banks.
• As a liability on the central bank’s balance sheet. Accepted as – Legal tender, medium of payment.
• Freely convertible against commercial bank money and cash. Fungible legal tender, holders need not have a bank account.

Concerns

• Digital divide, financial literacy, access points. Vulnerable to cyber attacks / hacking.
• Infrastructure loss due to natural disaster.

Global Scenartio

• 105 countries with 95 % global GDP exploring CBDCs. 10 countries have already launched CBDCs.
• 1st CBDC- Bahamian Sand Dollar, latest- Jamaica’s JAM-DEX 17 countries including China are in the pilot stage.
• China aims widespread use of its e-CNY by 2023.

“Less cash” economy is better than a “cashless” economy.

Way ahead

• Cannot replace physical currency completely Needs to supplement physical currency using e₹