Features and Functions Of Digital Money or Currency.
Prabhakar kumar 01 October , 2023
It is complete different concept of digitalization of money which is being implemented by RBI in India . It will be called as digital currency. Digital money is a means of payment that exits in purely electronic form . Digital money does not have physical presence and it is transferred using online systems. Cryptocurrency[ Bitcoin ] is also one of the well known form of this digital currency.
Digital money is also like a fiat currencies such as dollars or Euros. It can be exchanged using technologies such as smartphones , credit cards
and online cryptocurrencies exchanges . Sometimes it can be converted into cash through the use of an ATM .
Key Features :-
[1] It is being issued by Central Bank Of India in respect to their monetary policy and is assumed to be sovereign currency .
[2] This digital currency will be accepted as a medium of payment , as a legal tender and a safe store of value for Govt. agencies , businesses and citizens.
[3] It is a type of fungible legal tender for which individuals will not need a bank account to store .
Advantages of Digital Currency in India .--
Digital money or Rupee Digital Currency has a significant number of benefits over its physical counterpart . They are as follows :-
[1] CBDC or Central Bank digital Currency is digital in nature , thus there is no way to damage , burn or tear it physically .
[2] There is no chance of an individual of losing them unlike physical notes .
[3] They have a longer lifespan or durability in comparision to physical forms of currency .
[4] As central Bank of Digital Currency is under the authority of the Central Govt. , it has less responsive to volatility as compared to cryptocurrencies like Bitcoin , Ethereum , etc.
[5] It will help the Reserve Bank of India to reduce its expenditure on issuing money and its movement .
[6] Digital currency will also help in easing the need for interbank settlement .
[7] Due to smart or digital contracts , CBDCs will simplify the process of the tax collection .
[8] Transactions with digital rupees are easily traceable and and help its retail users and MSMEs in proving their creditworthiness.
[9] Certain digital currencies like Ethereum , enable the creation and execution of smart contracts which automate and enforce agreements without the need for intermediaries .
[10] It makes easy micropayments , allowing for tiny transactions that would not be feasible with traditional banking systems.
[11] Digital money can represent physical assets like real estate or art , through tokenization , making these assets more easily divisible and transferable.
[12] It simplifies cross border transactions by reducing the time and cost , attached with old banking system.
[13] Some digital currencies offer enhanced privacy features , allowing users to conduct transactions with greater anonymity compared to old banking.
Here it is important to mention that the specific features and functions of digital money can vary significantly depending on the type of digital currency , with cryptocurrencies like Bitcoin having different characteristics than centralized digital currencies issued by Govt. or private companies . In this way we see digital currency is more easy to handle for retail users and economical for RBI to monitor in market transaction . We can call it as virtual currency which has no presence in real term .--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------