Digital Currency - The Surging Trend

In this technological era where everyday essentials and activities are getting digitalised, the future holds a huge potential of physical currency being replaced by digital currency very soon.

What Is Digital Currency? 

Digital currency or electronic currency is any currency, money or money-like asset that performs transactions online through the internet. It is stored or exchanged within the computer system & can be accessed only via computer or mobile phones. No requirement of intermediaries, seamless transactions across borders & low charges has led it to rise in the market rapidly.

In this regard, El Salvador, a country located in Central America, created history by adopting Bitcoin as its national currency which was backed by legal tender. It became the first-ever nation in the world to initiate the upheaval. Several other significant economies of the world like the USA, China, European Union, etc. along with 16 other countries are also seeking to generate their digital currency which will be backed by their respective central banks. India is running in this race as well & has already initiated by launching the "E-Rupi". E-rupi is an online-based voucher that can be redeemed without any bank account, Internet banking, or card but with QR Code or SMS. It was primarily introduced to ease the buying & selling process of COVID-19 vaccines. However, the Indian Government hasn't formalized it as a national currency for customary use.

But why should India adopt a Digital Currency?

Initially, India did not show a generous interest in bitcoin or dogecoin-like e-currencies, however, the rising demand for Bitcoin in the international markets has developed enthusiasm in Indian investors as well.

With technological advancement, digital currency certainly seems to be the future of payment. And a digital currency that is backed by the Central Bank means approved by the country's national bank with the legal tender makes it a more secure mode of payment.

Centrally Backed Digital Currency (CBDC) is a safe, secure, reliable, and transparent way of money transfer, especially for people who are investing huge amounts in online currencies such as bitcoin, ripple, etc from India.

For the RBI (Central Bank of India), the cost of production and distribution of digital currency is almost zero as it is electronic, can be generated in a few seconds and is easy to transfer to any place online. Also, it becomes easy to track and monitor for the Central Bank. This means that the possibility of money laundering, terror funding, foreign funding, black money and many other illegal practices would be under the direct check of the Reserve Bank Of India.

Stability:

There are many pre-existing digital currencies like Bitcoin, Litecoin, Ripple and many more. However, these are the most volatile currencies. Rates of such currencies keep changing frequently and it becomes extremely dangerous to rely a nation's money on such a highly mysterious and unstable currency; whose developer is not even known yet but is still functioning in the world.

Private players in the field of technology are creating an environment of monopoly. They are trying to dictate the choices and opinions of people, which is curbing their freedom. And the presence of these big tech companies in finance and banking can be a sign of danger for a developing nation like India.

In India, the need for centrally owned digital currency arose when many high-class people showed their interest in bitcoin & later, the demand expanded to a significant section of society. Post which, RBI is planning to launch a digital currency that is stable and in control of country authorities i.e. independent of foreign players influence. It is working on a phased implementation strategy to introduce it in the national market.

What can be the situation shortly?

The biggest fear which is identified by the RBI Deputy Governor, T Rabi Sankar, is that - there may be chances of withdrawal of cash from banks due to hesitancy in people regarding the availability of cash and fear of transformation in the money system.

The government may impose a cap on the minimum amount of digital cash and amount stored in Banks as the banking business is based upon lending. And if it has no cash or money then its operations would become difficult. The government may also induce some liquidity in the economy to maintain the inflation rate at 4-2% which will be the most challenging task for RBI.

In India, people save most of their amount in the banks which provides them interest, but by storing money in a digital wallet; people may not get a minimum interest on their deposits.

Cases of cyberattacks may arise due to the overuse of the internet by citizens. Attackers are very clever and can steal significant amounts of data smartly by fake links or emails.

These are some of the potential challenges which the Indian government, Central Bank and people may have to face in future after the introduction of digital currency. Especially the labour class of the society might be triggered in this digital transformation due to the scarcity of monetary resources.

The simplicity of the implementation and raising awareness in society regarding the process is a must to safeguard the interest of citizens and create a safe and secure digital ecosystem.

Hence, on one hand, if there is the elimination of ghost beneficiaries or fake transactions of money, then on the other hand there might be the possibility of generation of instability in the implementation of the process. But the conclusive truth is; digital currency is the reality now and timely adoption of its provision would prove beneficial for our nation.

STAY SMART & STAY SMART ! 

Blog By ~ Surakshit Kapoor ✨