Arjuna (Fictional Character): Krishna, Previously we had discussed about what is digital rupee and how it is going to work, but how do you think the government and RBI will bring this dream of Digital Rupee to reality?
Krishna (Fictional Character): Arjuna, the motive of the government behind implementation of digital rupee is to reduce the cash transaction in the system. This is a big task for the government which is not going to be easy and it will be a long process. Just like every coin has 2 side and every idea has it’s pros and cons, implementation of digital rupee also has its benefits as well as challenges.
Arjuna (Fictional Character): Krishna, what are the Benefits of using Digital Rupee?
Krishna (Fictional Character): Arjuna, following are the benefits of using digital rupee:
1. RBI Survey showed that there will be increase in online transactions, which will help in increase in transparency in those sectors where cash payment volume is higher.
2. It will reduce the need for card networks, payment gateways and there will be reduction in risk of default since the entire control is in the hand of RBI.
3. Unlike Cryptocurrency, the digital rupee is governed by the central authority. Thus, it has a low risk of being volatile and provides security to its user.
4. Digital Rupee may allow for much faster transactions than those performed through traditional financial institutions.
5. It may allow people in remote areas to make transactions easily and hassle-free without use of internet.
Arjuna (Fictional Character): Krishna, What Challenges are there that have been allied with its benefits?
Krishna (Fictional Character): Arjuna, Following are the challenges which RBI need to overcome while introducing digital Rupee:
1. Transfer of payment without internet: Currently payments through UPI are being done with the help of internet but There can be issue of non-availability of internet for making payments in rural areas.
2. Since RBI will be having complete log of the entire chain of transaction which was not possible in cash transactions, this might not gain popularity for people to adopt.
3. No incentive to switch to digital rupee for user: There is no real incentive to switch to a CBDC as a growing proportion of retail transactions are done already by using UPI-based fast payment systems.
4. Potential cybersecurity threat: Every new invention in technology always invites cybersecurity threats.
Arjuna (Fictional Character): Krishna, what one should learn from this?
Krishna (Fictional Character): Arjuna, by bringing Digital Rupee in market government is trying to minimize the cash transactions and bring transparency in the market. In this budget the government might consider bringing compulsion of use of Digital Rupee in certain sectors i.e., payments in certain transactions will be made by mode of Digital Rupee only. Adopting new technology and innovation is a step in right direction but one should always lookout towards the possible threats and risks that comes with it.