The digital rupee rollout is a big step ahead in India’s digital transformation. It is an excellent opportunity for India since it has potentially increased the ease of doing business, as well as improved resilience and security of the entire payments' infrastructure.
A few thoughts and insights on why these are a groundbreaking development in the monetary space in the country -
- Centralization: Ushers in more trust, resilience, and efficiency. Although it has a likeness to cryptocurrencies as far as the form factor being virtual is concerned, but quite unlike the same, the digital rupee will not be decentralized, but will be regulated by the RBI, thus making it completely legal, transparent, and admissible by all financial and legal entities.
- Convenience: Every unit can be uniquely identifiable and traceable. It is programmable, and has the potential to add multiple dimensions like end uses, time limit and transferability. It allows all stakeholders to record the transactions and balances. These three differentiating characteristics – identifiability, programmability, and distributed ledgers – can unleash a new set of economic possibilities.
- Financial Inclusion: No bank account needed like that for UPI. This is one of the major advantages as one does not even have to open a bank account in order to transact.
- Real-time: The payment will be in real-time. The network and customers can easily access all transactions within authorized networks, enable real-time account settlements and ledger maintenance.
- Fraud Prevention: The Digital Rupee can help prevent fraud. While the existing systems rely on post-facto checks to prevent fraud, the innovative solutions can address these proactively with embedded programmability and regulated traceability.
- Operational Costs: Having digitized currency saves costs of printing, distributing, and logistics management of cash. The benefit of digital currency is also that they do not get torn, burnt, lost, or physically damaged.
- Monitoring: Governments can access all transactions happening within the authorized networks, playing a pivotal role in monitoring Direct Benefit Transfers (DBT), making them faster and reducing malpractices in the payment system.
