CENTRAL BANK DIGITAL

CURRENCY (CBDC)
The Future of money..
Central bank digital currencies (CBDCs)
are a form of digital currency issued by a
country's central bank.

Crypto + Regulation = CBDC

....why do we need CBDC’s,

when we have cash and
UPI??
Lets understand the properties of Money!!

Money can be used as an Asset.

Money is a store of value.
Money can be used as form of currency.
Money is unit of account.
Money is medium of exchange.

While all other properties are met with ease, Exchange of

money is a complicated and an expensive task due to
intermediaries !!
Here’s why
abhishekjnair
 CROSS BORDER TRANSACTIONS
Transaction volume – $23.5 Tn in 2020 (It is expected to that
the remittances to India this year would be ~$100Bn with a
growth of 7% in the coming future.)

Transaction cost - $120 Bn in 2020 (5%-10% is the range of

commission charged by banks)

Settlement time – 2-3 days (This leads to increased risks like

currency fluctuations, settlement risk, etc)

If CBDC’s and UPI’s both facilitate online transactions,

then why don’t we use UPI’s for the transactions as they
are faster medium of exchange??
 CBDC Vs UPI
Basis CBDC UPI

FINALITY OF
Instant 1-2 Business days
SETTLMENT

NATURE Digital Tender Payment Protocol

INTERMEDIARY None Commercial Bank

Not backed by Central

LIQUIDITY Backed by Central government
governement

OFFLINE Available Not available

Might be anonymous for low

ANONYMOUS No anonymity
value transactions

abhishekjnair
 abhishekjnair

The transferred
amount
CBDC between
individuals will
It is a real time
be settled
settlement
Can be transacted immediately
based on
and stored in and do not
blockchain
wallet on
technology require post
smartphone and transfer
which is updated
has no settlements
immediately
intermediaries
with execution which takes
involved like
of transfer. time and money.
banks.
 BENEFITS
Efficient and cheaper. The RBI incurs ~5000 Cr in printing money which can be
saved to a large extent and this is most efficient way as storage, issuance and
transfers are cheap and faster.

Secured instrument. If a bank goes bankrupt, your money would be secured only
upto 5 lakh but in case of digital currency, RBI owes full amount to the bearer.

No settlement Risk. In normal online payments, banks need to settle the

transaction which makes it costly and time taking process. CBDC’s give choice to
the market participants and to use settlement options and each transaction will
be recorded in the blockchain technology.

Reduces fraud. As the transactions are recorded, the trail of money can be
tracked which would lead to reduced frauds and better investigation.

Environmental Impact. The adoption of digital currency would promote

sustainability due to less paper use as currency.
 CHALLENGES
Literacy - The rural inclusion would be a great opportunity and
a challenging part for the government as the concept of
digitalization has still not reached there.
As the ownership of CBDC’s wont provide any interest unlike having
savings in bank. The government has to make it lucrative for the
population especially for the people who are in the rural areas.

Answers we are looking for

What incentive or schemes do government come up with to

penetrate the system within the rural population?
How much expenditure does the government incur to build the
ecosystem of digitalization?

abhishekjnair
Energy Intensive System - CBDC is built on centrally controlled
data bases or Distributed Ledger Technology(DLT). This
technology requires high level of infrastructure and are highly
energy intensive.
(~226 Mn UPI transactions which occur on a daily basis and the
focus of RBI is to convert these UPI transactions into digital
currency. Thus, the energy requirement would be very high)

Answers we are looking for

On one end, the digitalization is the remarkable innovation

towards sustainability and on the other end, the use of the newer
technology requires huge quantum of energy to work. Is it a really
good trade off??

abhishekjnair
 RECENT NEWS
EMTECH completes Ghana CBDC hackathon on public
DLT.
Source : https://www.ledgerinsights.com/emtech-ghana-cbdc-hackathon-public-dlt-hedera/

European Central Bank lays out €1.2bn plan for

development of digital euro
Source : https://www.dlnews.com/articles/regulation/ecb-to-pay-more-than-one-billion-euros-for-digital-euro/

Bank of Spain selects partners for CBDC testing

Source : https://cointelegraph.com/news/bank-of-spain-selects-partners-for-cbdc-testing

Palau advances CBDC with Ripple in phase 2 of PSC

program launch
Source : https://www.ledgerinsights.com/emtech-ghana-cbdc-hackathon-public-dlt-hedera/

75 US Lawmakers Now Support CBDC Anti-Surveillance

Bill
Source : https://news.bitcoin.com/75-us-lawmakers-now-support-cbdc-anti-surveillance-bill/
Follow me for more such amazing
content

abhishekjnair