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Central Bank Digital Currency: A Future of Digital Wallet By: Dhruv Parikh (Narayana Business School)
What is Central Bank Digital Currency: As and when time is evolved on contrary money also evolved like in the ancient India where for the transaction purpose, Barter system was available after that Coins like aluminum and gold coin was used after that Cash and coins followed by NEFT,RTGS,SWIFT and than comes digital wallet and UPI and Now what it was trending is Central Bank digital currency (CBDC). CBDC recently emerged as debatable topic amongst community of people belong to or have some interest in Economics and Finance field .CBDC is an electronic form of country’s currency (In India we can say Digital Rupee, In US-Digital Doller) that citizen can use to make digital payments. CBDC is issued only by central bank of respective country and it is universally accessible. Talking about India in the recent Union Budget presented on 1st February 2022 by our Honorable Finance Minister Nirmala Sitaraman ji also mentioned that central bank, institutions and government are doing research and analysis on introducing a new form of digital money and its impact on country’s Monetary policy and Fiscal policy. Why CBDC is comes in news again and again? As we know that from past many years especially from the covid times Crypto currencies has wider their scope in financial market as crypto’s in India not legal and it was not for the payments of goods and services but Crypto Currencies are available as Investment purpose In India. But when talking about Crypto currencies they do not have any regulator also there is no data set of transaction like who give how many cryptos to whom? So due to this it will create a dark room where no one can able to see each other and there is possibility that Crypto currencies might be use for unethical purpose which in turn harmful for country’s financial, economic and Security purpose. Due to which Central bank was realized that they need to enter in digital currency space otherwise if private players become dominant it will very difficult for central bank to control country’s financial system. Also Crypto market sometimes extremely volatile and due to no regulator for crypto market sometimes investors suffering from massive loss, so to protect the citizen’s money this CBDC concept was evolved. So on contrary while CBDC is legal by Government and regulated by Central Bank meaning anyone can use them for buying good and services. How CBDC Work? Like what we used to for cryptocurrencies a underlying distributed ledger technology to create digital ledger, in simple terms A blockchain technology will help in proper management of CBDC. Also In India Respective filed expert is analyzing pros and cons and all the in and out of Block chain technology so it will be better and protecting version of CBDC in India.
