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ARTICLE · 27 OCTOBER 2022

Understanding RBI's Central Bank Digital Currency And Its Implications

Obhan Mason
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The Reserve Bank of India ("RBI") recently published a concept note on Central Bank Digital Currency ("CBDC") to explain its approach towards introduction of the digital rupee and create awareness for its planned features ("Note")...

IndiaTechnology
Ashima Obhan
Ashima Obhan
Seerat Bhutani
Seerat Bhutani
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Introduction

The Reserve Bank of India ("RBI") recently published a concept note on Central Bank Digital Currency ("CBDC") to explain its approach towards introduction of the digital rupee and create awareness for its planned features ("Note")1.

The RBI defines CBDC as the legal tender issued by a central bank in a digital form, which is akin to sovereign paper currency. It, however, takes a different form, exchangeable at par with the existing currency and shall be accepted as a medium of payment, legal tender and a safe store of value.

CBDCs Vs. Cryptocurrencies

The RBI has time and again made its stance clear on the risks associated with private virtual currencies i.e., cryptocurrencies. It is reiterated in the Note that, cryptocurrencies undermine India's financial and macroeconomic stability because of their negative consequences for the financial sector. Considering these risks, the RBI has proposed CBDCs as a risk free digital currency, aimed at

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