Context:
The US President issued executive order banning the establishment of Central Bank Digital Currency (CBDC)
CBDC in India:
- Refers to a digital form of paper currency, functioning as legal tender and issued and backed by a central bank.
- Denoted as e-Rupee (e₹).
- Launched in – 2022 by the Reserve Bank of India.
- Main Features –
- It is interchangeable one-to-one at par with the fiat currency and is the same as a sovereign currency.
- Appears as a liability on the RBI balance sheet.
- Must be recognised as a legitimate form of payment Fungible legal tender for which holders need not have a bank account.
- Available in online and offline mode.
- Types of CBDC –
- Retail CBDC: An electronic version of cash primarily meant for retail transactions; they are of 2 types;
- Token-based: Accessed using private & public keys, allowing for anonymous transactions.
- Account-based: Requires digital identification for users to access & use their accounts
- Wholesale CBDC: It is designed for restricted access to select financial institutions.
- Bahamas – 1st nation to launch CBDC, named Sand Dollar
Source: TH
Previous Year Question
With reference to Central Bank digital currencies, consider the following statements:
1. It is possible to make payments in a digital currency without using US dollar or SWIFT system.
2. A digital currency can be distributed with condition programmed into it such as a time-frame for spending it.
Which of the statements given above is/are correct?
[UPSC Civil Services Exam – 2023 Prelims]
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: (c)
