Central Bank Digital Currency (CBDC)

Central Bank Digital Currency (CBDC)


  • Despite the involvement of 13 participating banks, daily transactions in this digital form of fiat money are reportedly only in the range of 10,000-12,000, though 3.5 million merchants and 1 million customers were selected for RBI’s nearly-year-old pilot project across 13 cities.

What Is a Central Bank Digital Currency (CBDC)?

  • Central Bank Digital Currency (CBDC) is a digital counterpart of government-backed fiat money.
  • This kind of digital currency is connected to the nation’s currency and issued by its central bank.
  • The same would be the case with the ‘digital rupee’ in India as it will be backed by the central bank of India, i.e. RBI.
  • According to RBI, “A CBDC is a legal tender issued by a central bank in a digital form.
  • It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency.
  • It is a sovereign currency in electronic form and would appear as a liability (currency in circulation) on the balance sheet of the central bank of India.
  • Although CBDC is a virtual or digital currency, it cannot be compared to the private virtual currencies or cryptocurrencies that have exploded over the past ten years.

Features of CBDC:

  • the legal tender
  • issued and governed by the central bank
  • is in digital form
  • same as a fiat currency
  • will be based on blockchain technology

Syllabus: Prelims; Economy