General Studies Paper 3 (Indian Economy) (Science & Technology)
Question:- 109. Recently, the Reserve Bank of India has launched India’s first Digital Rupee for the wholesale segment. How is Digital Rupee different from other cryptocurrencies? How is it better than other cryptocurrencies? Explain. Answer in 250 words.
Nov 08, 2022


The emergence and development of cryptocurrencies and Blockchain technology has increased interest in cashless societies and digital currency. As a result, governments and central banks throughout the world are considering the use of government- backed digital currencies. The CBDC, or the Indian e-rupee, is a digital token issued by the RBI and is linked to the value of the fiat currency of the country.



Digital rupee and cryptocurrencies both use blockchain technology to operate. However, there is a huge difference between both of them as:

  1. 1.A country’s fiat currency is known as its central bank digital currency (CBDC), whereas cryptocurrencies are an alternative payment method with their own proprietary algorithm.
  2. 2.Digital rupee is similar to the paper banknotes that central banks like the RBI issue, hence, digital rupee can be converted into cash unlike cryptocurrencies which are just digital assets in a decentralized network.
  3. 3.The value of a crypto currency is independent of central banking authorities and follows a transparent process from mining to ownership to transfer of assets, in contrast to digital currencies, which are completely regulated by the central bank and the government, who sets the currency’s value.
  4. 4.Digital rupee operates on authorized/ private blockchain whereas cryptocurrencies operate on unauthorized/ public blockchain.



  1. 1.The introduction would surely alter the playing field because the digital rupee will increase efficiency and transparency due to the use of blockchain technology. Blockchain will also enable ledger maintenance and real-time tracking.
  2. 2.Customers will have continuous access to the payment system, whether they are wholesale or retail. Direct payments from Indian customers reduce transaction costs and enable real-time account settlements. Additionally, employing a digital rupee will expedite international trade and remove the requirement for opening a bank account.
  3. 3.Cryptocurrencies are very volatile with their value shifting all the time. Digital rupee would minimize the dangers associated with utilizing digital currencies in the current form.



India’s advancement in the battle for virtual currencies is the main goal of the Reserve Bank of India’s (RBI) pilot project on digital currency. Digital rupee’s launch has definitely put India in the league of advanced nations that have responded to the needs of digital future.