3.1 Central Bank Digital Currency/ Digital Rupee (e₹)
The Digital Rupee is a Central Bank Digital Currency (CBDC) that functions similarly to
physical currency notes issued by the RBI, but in electronic format. It enables individuals to
make and receive payments using QR codes or Digital Rupee Wallets owned by both the payer
and the payee.
How you can buy e₹
Selected banks provide the option to purchase digital currencies, regardless of whether or not
you have an account with them. In essence, the process is similar to withdrawing cash from
your bank account. However, instead of obtaining physical currency, the banks would add
funds to your e₹ wallets, allowing you to use it for transactions just like traditional cash.
How it is unique from UPI
UPI transactions entail the recording of information in two bank account statements that are
managed by commercial banks. As e₹ seeks to substitute physical cash and functions as a
national currency, it would not be reflected in your personal bank accounts. Instead, the RBI
would centrally manage and keep the records of e₹ transactions.
What are the benefits for the general public?
- More safe than carrying physical currency
- Eliminate concerns with dirty cash notes.
- Experience seamless and effortless transactions without any fees.
- Simplifies the process of monitoring and recording receipts and payments
Challenges - Privacy infringement: The Reserve Bank of India centrally records every transaction,
resulting in a loss of privacy. - Absence of internet access in remote places
- Prevalence of cyber security threats among a large number of individuals.
- Centralized data might potentially be utilized by authorities for other purposes.
3.2. Crypto Currency
Cryptocurrency is a decentralized digital payment system that operates independently of
traditional banking institutions for transaction verification. This is a decentralized system that
allows anyone from any location to make and receive money. Cryptocurrency payments are
only digital records in an online database that describe specific transactions, rather than being
tangible money that is transported and traded in the real world. When you move bitcoin funds,
the transactions are documented in a transparent ledger accessible to the public. Digital wallets
are used to store cryptocurrency.
Cryptocurrencies operate on a decentralized public ledger known as blockchain, which
is a comprehensive log of all transactions that is regularly updated and maintained by currency
holders. Cryptocurrency units are generated through a process known as mining, wherein
computer power is utilized to solve intricate mathematical problems that produce coins. Users
have the option to purchase the currencies from brokers and thereafter store and utilize them
using encrypted wallets. Ownership of bitcoin does not entail possession of any physical assets.
The possession you have is a crucial tool that enables you to transfer a document or a
quantifiable entity between individuals without the need for a reliable intermediary.
Examples of Crypto currency
- Bitcoin
- Ethereum
- Litecoin
- Ripple
How to transact with crypto currency
Step1: Making a platform selection is the initial stage. Generally, a devoted cryptocurrency
exchange or a traditional broker is the superior option
- Conventional brokering. These are online brokers that facilitate the purchase and sale of cryptocurrencies in addition to equities, commodities, and ETFs. The trading fees on these platforms are typically lesser, but they offer fewer cryptocurrencies.
- Exchanges for cryptocurrencies have emerged. Each cryptocurrency exchange provides a unique selection of cryptocurrencies, wallet storage, interest-bearing account alternatives, and additional features. Many exchanges impose fees based on the asset.
- Consider which cryptocurrencies are available, the fees charged, the security features, the storage and withdrawal options, and any educational resources when comparing various platforms.
Step 2: To fund the account.
- After selecting a trading platform, the subsequent course of action is to fund your account in order to commence trading. Depending on the platform, the majority of cryptocurrency exchanges permit users to buy cryptocurrencies with fiat (i.e., government-issued) currencies such as the US Dollar, the British Pound, or the Euro using debit or credit cards.
- Credit card purchases of cryptocurrencies are regarded as hazardous, and as such, certain exchanges do not permit them. Additionally, some credit card companies prohibit cryptocurrency transactions. This is due to the extremely volatile nature of cryptocurrencies; investing in them could result in incurring debt or incurring high credit card transaction fees.
- Additionally, wire transfers and ACH transfers are supported by some platforms.
Platforms vary with regard to the accepted payment methods and the duration of
deposits and withdrawals. Likewise, the clearance time for deposits differs depending
on the method of payment. - Fees are an essential factor to consider. These encompass prospective transaction fees for deposits and withdrawals, in addition to trading fees. Fees will differ depending on the payment method and platform; therefore, it is prudent to conduct preliminary investigation on this aspect.
Step 3: Order placement
- You may place an order through the mobile or web platform of your broker or exchange.
To initiate the purchase of cryptocurrencies, proceed as follows: click “Buy,” select the
desired order type, input the quantity of cryptocurrencies to be acquired, and finalize
the order. Similar procedures are governed by “sell” directives.
Storage of Crypto currency
Hot wallet storage: Refers to the usage of internet software to safeguard the private keys of
your cryptocurrency holdings.
Cold wallet storage: sometimes referred to as hardware wallets, utilizes offline electronic
devices to securely store private keys, distinguishing it from hot wallets.
Instances of fraudulent activities and deceptive schemes related to cryptocurrencies
- Fake websites
- Virtual Ponzi schemes
- Celebrity endorsements
- Romance scams