The Reserve Bank of India’s recent foray into the realm of digital currencies has brought forth the concept of Central Bank Digital Currency (CBDC). This novel form of digital legal tender issued by the RBI is distinct from cryptocurrencies and holds various implications for the financial landscape. In this answer, we will delve into the disparities between CBDC and cryptocurrencies, while also exploring the rationale behind introducing an e-rupee.


Central Bank Digital Currency (CBDC) vs. Cryptocurrencies:

CBDC is a digital legal tender akin to the fiat currency issued by the RBI. While it shares the same value and one-to-one exchangeability with physical cash, it exists in a non-physical form, devoid of paper or polymer.

As a fungible legal tender, CBDC does not necessitate bank accounts for holders, and it appears as a liability (currency in circulation) on the RBI’s balance sheet.

Unlike private cryptocurrencies like Bitcoin, CBDCs are backed by the RBI and cannot be considered commodities or claims on commodities. Cryptocurrencies lack intrinsic value and remain unsupported by central banks or any specific issuer, devoid of debt or liabilities.

Need for Introducing an E-Rupee:

Reducing Operational Costs: The adoption of e-rupee can curtail the expenses associated with managing physical cash and introduce efficiency in payment systems.

Boosting Cross-Border Payments: The implementation of CBDC could foster innovations in cross-border payments, simplifying international transactions.

Combating Illicit Activities: Introducing e-rupee can address concerns related to money laundering, terror financing, and tax evasion prevalent in the realm of private cryptocurrencies.

Benefits of CBDC:

Reduced Dependency on Cash: CBDC has the potential to diminish reliance on physical cash, leading to higher seigniorage due to reduced transaction costs and settlement risk.

Cost Savings: The RBI suggests that CBDC adoption will lead to cost savings in printing, transporting, storing, and distributing currency.

Enhanced Globalization of Payment Systems: CBDC facilitates more efficient and cost-effective globalization of payment systems.

Improved Settlement Efficiency: CBDC could augment settlement efficiency and stimulate innovation in cross-border payments.

Risk Mitigation: CBDC provides the public with similar uses as private virtual currencies without the associated risks.

Continuous Access to Payment Systems: With transparent and efficient technology, the digital rupee ensures uninterrupted access to payment systems for customers, both wholesale and retail.


The introduction of CBDC marks a crucial step for central banks worldwide, ensuring they keep pace with the shift towards digital payments and retain control over their national currencies. CBDC presents the possibility of a more robust, efficient, regulated, and trustworthy payment option, ultimately bolstering the status of legal tender in the evolving financial landscape.

Legacy Editor Changed status to publish July 26, 2023