E-Rupee: Central Bank Digital Currency (CBDC)

E-rupee is similar to sovereign paper currency but takes a different form. It will be exchangeable at par with the existing currency and will be accepted as a medium of payment.

It will be a valid legal tender and a safe store of value. The digital rupee would appear as a liability on a central bank’s balance sheet.

According to the RBI, e-rupee can be structured as ‘token based’ or ‘account-based’. A token-based CBDC is a bearer instrument like bank notes, meaning whosoever holds the tokens at a given point in time is presumed to own them.

In a token-based CBDC, the person receiving a token will verify that his ownership of the token is genuine, whereas in an account-based CBDC, an intermediary verifies the identity of an account holder.

A token-based CBDC is viewed as a preferred mode for CBDC-R as it would be closer to physical cash. CBDC-W is for the wholesale market for asset classes which are bilaterally or settled outside CCP arrangements – Commercial Papers and CDs.