GS Paper - 3 (Economy)

Prime Minister on 2 February 2022 said the digital rupee, proposed in the union budget, could be exchanged for cash and will open new opportunities in the fintech sector. The central bank digital currency or the digital rupee will make online payments more secure and risk free and boost the digital economy in the years to come.

What

  1. The digital rupee will be the digital form of our physical rupee and will be regulated by the RBI.
  2. This will be such a system that will enable exchange of physical currency with digital currency.
  3. The launch of CBDC will make digital payments and online transfer of funds more secure and risk free.
  4. The digital rupee will revolutionise the fintech sector by creating new opportunities and lessen the burden in handling, printing and logistics management of cash.
  5. The Finance Minister had announced that India will launch a 'digital rupee' in 2022-23 using blockchain and other technologies.

What is a blockchain?

  1. A blockchain is simply a shared ledger, or database, that can be accessed, filtered, and manipulated quickly and easily by any number of users at once.
  2. It stores information in groups called blocks, which have a certain storage capacity. When full, they are linked, or “chained”, to the previous block.
  3. Any subsequent information is put into a freshly created block and the immutable chain continues to grow.
  4. In a blockchain, each participant computer, or “node” has a full record of the data that has been stored on it since inception.