The first pilot of the Reserve Bank of India – issued (RBI) digital rupee will begin today. Earlier this week, the Central bank announced that the digital currency would begin with four banks such as SBI, ICICI, YES bank and IDFC First Bank in four cities across the country. The testing would begin in four cities like Mumbai, New Delhi, Bengaluru and Bhubaneswar and later extend to Ahmedabad, Gangtok, Guwahati, Hyderabad, Indore, Kochi, Lucknow, Patna and Shimla. RBI will include more banks and locations in the coming weeks.
Currently, the full details of the functioning of the digital Rupee remain unclear at the moment, but the RBI explains that the e-Rupee will be available in the form of a digital token that represents legal tender. It would be issued in the same denominations that paper currency and coins are issued at present, and distributed through intermediaries like banks.
The Digital Rupee could be used for Person to Person (P2P) and Person to Merchant (P2M) transactions. Payments to merchants can be made using QR codes displayed at merchant locations. The digital rupee will let users transact like physical cash but in a digital form. On paper, it means users can transact without involvement of any bank, though the exact functionality will be clarified once the testing begins.
On the flip side, crypto currencies like Bitcoins aren’t recognised as legal tender and they have been backed by a Blockchain technology.