With the imminent introduction of the Digital Rupee, India is officially poised to enter the cryptocurrency market. With the unstoppable boom of cryptos like Ethereum and Bitcoin, the Digital Rupee is India's safe crypto that is likely to be released in the third quarter of this year.
Several countries, such as USA in particular, are also set to roll out their own central bank digital currency (CBDC). So, this timely release of the Digital Rupee is much welcomed.
For any currency to be used in the market, it needs to be authenticated and validated. The Digital Rupee is India's answer to producing a digital currency where its validity will not be questioned. Furthermore, it will provide the populace with a stable cryptocurrency that they can use on a daily basis as an option to cash. The impact of the Digital Rupee cannot be overstated, as it has the potential to redefine how money is used, exchanged, and handled.
How Digital Rupee is going to transform fintech
Reducing cash handling cost: In a recent speech, PM Narendra Modi stated, "The digital rupee will revolutionise the fintech sector by creating new opportunities and lessen the burden in handling, printing, and logistics management of cash."
For a country as large as India, handling the printing, supply, and logistics of cash are too expensive. Now, the introduction of the digital rupee at a post-pandemic time where the populace is familiar with digital payments and is more willing to accept them will significantly reduce the logistics costs involved in handling cash.
Secure cryptocurrency: Based on blockchain technology, the digital rupee being controlled by the Reserve Bank of India (RBI) will ensure that the population can enjoy all the benefits of crypto without having to deal with its possible pitfalls.
Compared to the riskier virtual digital assets, the Digital Rupee enables users by always ensuring reliable transactions. Furthermore, this currency won't be subject to the volatile changes of the market. Even during unprecedented times like the pandemic, the Digital Rupee will sustain adverse market conditions because it is being regulated and monitored by the RBI.
Digital Rupee's impact on Indian fintech players: Countries like El Salvador have made Bitcoin legal tender, and Cambodia and the Bahamas has already started to accept and use crypto as legitimate currencies. It is high time for India to join this market.
A report on CBDC read, "It may be imperative in the future as the use of cash declines and new forms of 'value transfer alternatives' become more widely used in the payment cycle." This means now is precisely the time for Indian fintech players to accommodate digital currency transactions. Furthermore, the Digital Rupee, which is based on distributed ledger technology (DLT), will have a monumental impact on push payments. Now is the ideal time for banks and financial services players to implement the necessary steps to ensure they are ready for the new asset class.
CBDCs' impact: The CDBC provides much-needed sovereignty and ensures that people are ready for a change in the future. The positive impact of the CDBC was perhaps best enunciated by Mr Monish Shah, partner at Deloitte India: "The non-interest bearing tokenised Digital Rupee is closest to cash and may pave the way for retail Central Bank Digital Currencies (CBDCs)," he said. Considering the future of international trade, with the Digital rupee being the first attempt, it will surely give way to multi-currency CBDCs, thereby enabling India to participate with other countries that are large and stable trading partners.
Furthermore, T Rabi Sankar, the RBI Deputy Governor, stated in a speech last year, "Payments using CBDCs are final and reduce settlement risk in the financial system. The need for interbank settlement gets eliminated if the digital Rupee is transacted on a UPI-like system," T Rabi Sankar said.
This potentially means that, for instance, an Indian vendor can pay his European supplier in real-time without the delay of any intermediaries that are required today. Thus, effectively eliminating time-zone differences in money transfer.
The Digital Rupee is India's first towards reliable and credible cryptocurrencies and one of the more promising milestones towards a Digital India. With the introduction of the digital rupee, citizens can now have a cryptocurrency that they can securely use and rely on in the future.
-- Sameer Aggarwal is the founder and CEO of RevFin. Views expressed here are personal.
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