In the words of Bill Gates, “The future of money is Digital Currency.” Well, the term digital currency has gained a tremendous amount of traction ever since the pandemic has set into the scene of the contemporary world. Wherever you go: maybe when you are passing through the road or maybe when you are just hanging out with your friends; you always hear a talk about digital currencies and what people think about it. While some seem pretty enthusiastic about the future prospects of digital currency, there are some who still have their reservations about it.
Despite the mixed opinions, the government of India took the internet by a storm when the finance minister, Ms. Nirmala Sitharaman proclaimed that India is ready to launch its own digital currency as financial year 2022-23 sets in. According to her, the digital currency would be issued by the Reserve Bank of India and hence could classify itself as a Central Bank Digital Currency (CBDC). This announcement added India to the list of nations engaging in the development of CBDCs in which China has the first mover advantage since it has been working on developing a digital Yuan since 2014. In addition, Japan has also been experimenting with the same and although the United States has deliberated over the idea of a digital Dollar, they haven’t put forth any official statement regarding the same.
The government in the development and distribution of India’s Central Bank Digital Currency (CBDC) would have a paramount role to demonstrate, including onboarding the right experts, taking all the stakeholders’ opinions and advices into consideration and ensuring laying down the foundation of distribution channel in order to facilitate optimum access to the digital currency for everyone. But what is it about digital currency which makes it more attractive of an option than traditionally transacting through institutions like banks?
Digital Currencies are developed through the blockchain technology: a technology which ensures better privacy since the data of the transactions wouldn’t fall under the authority of a single institution but the entire information would be decentralized over servers located in different geographical locations, which ensures better protection of the data. Apart from that, in this technology data is stored in blocks, which enables one to access all the data that has been stored in the past quite conveniently. In addition, the data stored in those blocks cannot be manipulated which further eliminates the chances of fabrication of data and lead the path towards better transparency.
Digital currencies are indeed the future of the world of currencies but how long will it continue to rule before it passes off the mantle to another invention, that only time will tell.