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Digital Currency Is Coming to India

Author:    Preethy Kurian, Crosspay   |   December 14, 2022

Digital Currency Is Coming to India. Here is What You Need to Know About It

India’s digital currency pilot project is officially underway as an alternative to paper notes and coins. In an unprecedented move, the Reserve Bank of India (RBI) has announced the launch of a new currency called Central Bank Digital Currency. The RBI will begin testing its retail central bank digital currency (CBDC), the digital rupee, in four cities –New Delhi, Mumbai, Bengaluru and Bhubaneswar. The initial participation from banks includes the State Bank of India, Yes Bank, ICICI Bank & IDFC First. The trial program will extend to nine more cities and four other institutions.

Presuming this process continues to be effective, and everything goes according to plan, it will mark a significant moment in the global acceptance of cryptocurrency as an integral part of modern economies.

What is Digital Currency?

Digital currency may alter how society thinks about money because it operates differently from physical forms of currency. Digital currency is exchanged exclusively via digital means, and never leaves a computer network. It’s not to be confused with “real” currencies like the U.S. Dollar, Pound or Euro, which are issued by governments; centralised and often backed by physical assets such as the government, gold or silver. Digital currency is not controlled by any central authority, but instead is distributed across a peer-to-peer network. This means that no bank or government can control your funds or freeze them. At its simplest, it is a digital form of currency that can be used to purchase goods and services.

There are three main varieties of these currencies: cryptocurrency (the most common variety), stable coins, and central bank digital currency—or CBDCs.

  • Cryptocurrency: Cryptocurrencies are decentralised forms of currency that use blockchain technology for security purposes. The most well-known example is Bitcoin (BTC), but there are many more —over 1,000 so far, according to coinmarketcap.com.
  • Stablecoins: A digital currency that is commodity-backed collateralised using physical assets like precious metals like gold or minerals or peg their market value to some external reference or the price of another asset, usually fiat currency (e.g., U.S. dollars). They attempt to keep their value constant and have low volatility. There are wide varieties of stablecoins, but three main types are fiat-backed, crypto-collateralised and algorithmic.
  • CBDCs: Central bank digital currencies (CBDCs) are digital forms of money issued by a country’s central bank that can be used to make payments via digital means. It is different from classic cryptocurrencies like Bitcoin because it is not decentralised —which means it is not independent of government control —but some experts believe it could become a necessary part of financial infrastructure in the future. CBDCs are central bank-issued digital currencies that would be used as legal tender and available to the public in transactions.

The Reserve Bank of India (RBI) is planning to introduce CBDCs to encourage more people to adopt electronic payments without worrying about fraud or theft. The central bank is planning to launch a closed user group (CUG) for merchants and customers who can transact via the proposed Indian digital currency. The e-rupee will take the form of a digital token for this model, with denominations identical to India’s paper currency.

Why is Digital Currency needed in India?

India’s quest to eradicate black money has been long and arduous, given its reliance on cash and its population of more than a billion people. The government supported the launch of this new program because it would reduce transactional costs and make things easier for people, banks and most financial institutions. India has been trying to improve its payments system since demonetisation, when it abruptly removed overhalf of the cash from circulation overnight and introduced a new form of currency, making life harder for all who use cash to make daily purchases. This is why India has been one of the few countries to pioneer going digital.

The government has likewise said that the new technology would reduce “the role of intermediaries and associated costs.” and would help reduce the cost of printing currency notes. This was in line with its goal of making India a cashless society, which it hopes will reduce financial fraud and increase tax collections. CBDC will help in the efficient settlement, and transfer of money will help curb illegal payments and has a high potential to reduce the cost of deposits, borrowings and liquidity management.

Difference between UPI and CBDC

A frequent question concerning CBDC is: How can it be differentiated from the Unified Payment Interface (UPI)? UPI transactions involve the intervention of banks, so when you use a UPI app, your message goes to a bank that debits your account and the bank credits another person’s account.

In CBDC, drawing a digital currency and keeping it in your wallet is similar to how you treat paper money. When making payments at stores or between individuals, this currency moves from its source (say, your phone) into their wallets. There is no bank routing and there is no intermediation of the bank.(As many people are confused about the differences between UPI and CBDC, it was necessary to clarify this point.)

What is its Advantage?

The CBDC can be used by people who otherwise would not have access to banking services or accounts. This will bring financial inclusion at a faster pace and make it easier for people to move from cash-based to digital transactions. Digital currency will also allow people to use their money more efficiently and access it at all times. This is because the CBDC will be stored in a digital wallet accessible on smartphones or computers .The CBDC will be more secure than cash because it is stored in a digital wallet that cannot be stolen or lost.

It will also help the government to reduce the cost of printing money and minting coins. Digital currency will increase transparency and reduce corruption by making it easier for governments and businesses to track illegal activities. The CBDC will also help control black money, often used for illegal activities such as drug trafficking, terrorism etc. It will make it harder for people to hide their transactions from government authorities. The CBDC can be used for all financial transactions, including lending, payments, and remittances.

How can I use India’s CBDC?

CBDC is a digital currency that functions as an electronic alternative to physical cash, allowing people to send money directly from one person or party to another. It can be stored on a smartphone or computer and spent using the same methods as cash.

You can use it in a digital wallet for online shopping or payments. You can also use it to pay bills or send money through mobile wallets like Paytm, Mobikwik etc. Anyone with a smartphone or computer with an internet connection can use it.


Ultimately, it takes time to predict what digital money will mean for India in the long run. However, suppose it successfully increases financial inclusion, reduces corruption,and enhances trust in a digital economy. In that case, there is no doubt that this will be a positive development for India. With the benefits of digital currency seemingly clear, more countries will likely follow India’s lead in rolling out their own digital monetary system. The world is moving further towards a cashless future.

A Note from Crosspay

With users from all over the world, Crosspay is committed to providing quick and easy financial services. Our partnerships with Yes Bank, one of the banks selected for the CBDC pilot programme, a premier bank in India, will enable us to offer top financial services to our customers in India.

Further, Crosspay plans to integrate a digital wallet service and mobile payment system into its current products. Customers can deposit money into an online account that they can use for payments. Crosspay aims to be the most trusted and secure partner for financial services in India. We are constantly looking for ways to improve our products and services, so that we can provide you with the best user experience possible.

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