CBDC-R users to hit 50000 by Jan-end on better acceptance

Subject :Economy

Context:

The number of retail users of CBDC-R is expected to touch 50,000 at the end of this month. Currently, this number stands at around 16,000.
The Reserve Bank of India (RBI) launched a pilot project for e₹-R on December 1 last year.

Central Bank Digital Currency

The term central bank digital currency (CBDC) refers to the virtual form of a fiat currency.
A CBDC( e₹-R) is an electronic record or digital token of a country’s official currency.
As such, it is issued and regulated by the nation’s monetary authority or central bank. As such, they are backed by the full faith and credit of the issuing government.
CBDCs can simplify the implementation of monetary and fiscal policy and promote financial inclusion in an economy by bringing the unbanked into the financial system.
Because they are a centralized form of currency, they may erode the privacy of citizens.
Although they aren’t formally being used, many countries are exploring the introduction and use of CBDCs in their economy.

Working of CBDC

Users will be able to transact with e₹- R through a digital wallet offered by the participating banks.
Transactions can be both Person to Person (P2P) and Person to Merchant (P2M).
The e₹-R offers features of physical cash like trust, safety and settlement finality. Like cash, the CBDC will not earn any interest and can be converted to other forms of money, like deposits with banks.
Eight banks are participating in the retail pilot project.
Use of e₹-R is voluntary and it is part of total currency in circulation.
e₹-R is using API (Application Programming Interface). It is is a way for two or more computer programmes to communicate with each other.

Advantages of CBDC