Digital Rupee has both pros and cons.
Given the complexity of the topic, very few understand the real story.
Here is a fact based analysis of India's eā¹
[Thread...]
Given the complexity of the topic, very few understand the real story.
Here is a fact based analysis of India's eā¹
[Thread...]
[1] What is CBDC? (Central Bank Digital Currency)
- Currency notes in Digital Format
- Issued by a central bank.
- Legal Tender
- In India we are calling this Digital Rupee (Symbol: eā¹)
RBI defines e-Rupee as a form of digital token that represents legal tender
- Currency notes in Digital Format
- Issued by a central bank.
- Legal Tender
- In India we are calling this Digital Rupee (Symbol: eā¹)
RBI defines e-Rupee as a form of digital token that represents legal tender
[2] Where does eā¹ fit?
- There is physical form of money (the cash you have); and digital form (eg. money kept in your bank account).
- eā¹ will fall in digital form.
- Globally: 92% money is digital
Natural question: why do we need ANOTHER digital form of money?
- There is physical form of money (the cash you have); and digital form (eg. money kept in your bank account).
- eā¹ will fall in digital form.
- Globally: 92% money is digital
Natural question: why do we need ANOTHER digital form of money?
![[2] Where does eā¹ fit?
- There is physical form of money (the cash you have); and digital form (eg...](https://pbs.twimg.com/media/Fi9AnFVVUAA3XV5.jpg)
[3] First let's understand: How money works in India: (simplified explanation)
- (Central Bank) RBI is responsible for money printing (mostly).
- RBI prints money. While distribution distribution is managed by the Banks (eg. HDFC, ICICI, SBI etc)
- What about eā¹?
- (Central Bank) RBI is responsible for money printing (mostly).
- RBI prints money. While distribution distribution is managed by the Banks (eg. HDFC, ICICI, SBI etc)
- What about eā¹?
![[3] First let's understand: How money works in India: (simplified explanation)
- (Central Bank) RB...](https://pbs.twimg.com/media/Fi9BpbHUYAAaim4.jpg)
[4] eā¹ will be quite similar:
- Issuance done by RBI
- Distribution done (in the pilot stage) by selected banks.
- So no major difference from existing system.
- Issuance done by RBI
- Distribution done (in the pilot stage) by selected banks.
- So no major difference from existing system.
![[4] eā¹ will be quite similar:
- Issuance done by RBI
- Distribution done (in the pilot stage) by...](https://pbs.twimg.com/media/Fi9DvJYUAAAAG7p.jpg)
[5] So then what's the difference?
- The difference lies at the settlement layer.
- What is settlement layer?
Let's say: I transfer 100Rs to you (from HDFC) and you receive 100 Rs (into ICICI)
Accounting entries:
- Akshat's account: (debit) 100
- You: (Credit) 100
- The difference lies at the settlement layer.
- What is settlement layer?
Let's say: I transfer 100Rs to you (from HDFC) and you receive 100 Rs (into ICICI)
Accounting entries:
- Akshat's account: (debit) 100
- You: (Credit) 100
![[5] So then what's the difference?
- The difference lies at the settlement layer.
- What is settl...](https://pbs.twimg.com/media/Fi9EHwTUcAAL68Z.jpg)
Now, banks like ICICI and HDFC mostly do not make these changes on real time basis (else, this would require a lot of computational power)
They do this periodically (eg. end of the day), called as periodic settlement.
With eā¹ the settlement operational cost goes down.
They do this periodically (eg. end of the day), called as periodic settlement.
With eā¹ the settlement operational cost goes down.
Digital Rupee will help in reducing cost of:
- Printing
- Storage
- Transportation
- Reconciliation (and delay)
- Settlement
- Printing
- Storage
- Transportation
- Reconciliation (and delay)
- Settlement
[6] But here is the problem:
- UPI actually solved a major pain point for customers: eg. you and I don't need to carry cash, we can use our phones and make a payment
- The payment is safe, secure, fast, reliable.
- But, eā¹ does not bring a major utility.
- UPI actually solved a major pain point for customers: eg. you and I don't need to carry cash, we can use our phones and make a payment
- The payment is safe, secure, fast, reliable.
- But, eā¹ does not bring a major utility.
[7] Let's break down the advantages:-
- Printing (92% of the money is digital, does not require printing)
- Storage (stored on computer nodes, so doesn't apply)
- Transportation (doesn't apply)
- Reconciliation (and delay) (RTGS, NEFT, IMPS are doing this well)
- Printing (92% of the money is digital, does not require printing)
- Storage (stored on computer nodes, so doesn't apply)
- Transportation (doesn't apply)
- Reconciliation (and delay) (RTGS, NEFT, IMPS are doing this well)
[8] It looks odd why crores of taxpayers money would be spent on just building a technology that is not really adding a MASSIVE value add.
[9] Arguments are given that: it will improve Financial Inclusion and/or Direct Benefit Transfer
Here is the official statement from a sitting Minister on the existing efficacy of DBT (Schemes)
Here is the official statement from a sitting Minister on the existing efficacy of DBT (Schemes)
![[9] Arguments are given that: it will improve Financial Inclusion and/or Direct Benefit Transfer
H...](https://pbs.twimg.com/media/Fi9Hv4ZUAAAc9Gv.jpg)
[10] With JAM (Jan Dhan, Aadhar, Mobile): thousands of crores have already been spent on:
- Giving people identity
- Financial inclusion (opening of bank accounts)
- Plugging transaction leakages
Here is the statement by Finance Minister
- Giving people identity
- Financial inclusion (opening of bank accounts)
- Plugging transaction leakages
Here is the statement by Finance Minister
![[10] With JAM (Jan Dhan, Aadhar, Mobile): thousands of crores have already been spent on:
- Givin...](https://pbs.twimg.com/media/Fi9IqGEUUAAbBjC.jpg)
[11] Natural question: why Digital Rupee? then
What problem is it REALLY solving?
Honestly, I am lost for answers.
But here is my guess.
What problem is it REALLY solving?
Honestly, I am lost for answers.
But here is my guess.
[12] This will make INR more Centralised.
Let's me break down this theory:
But, first read Dr Rajan's statement on the same topic.
Let's me break down this theory:
But, first read Dr Rajan's statement on the same topic.
![[12] This will make INR more Centralised.
Let's me break down this theory:
But, first read Dr R...](https://pbs.twimg.com/media/Fi9Jq8EVsAETm9k.jpg)
[13] Right now: RBI gives (some) power to other banks.
And those banks get some "autonomy" because they get to dictate the flow of money. For eg. HDFC gets a choice whom to loan money.
But, in Central Bank Digital Currency, the blockchain is Centralised, statement by RBI:
And those banks get some "autonomy" because they get to dictate the flow of money. For eg. HDFC gets a choice whom to loan money.
But, in Central Bank Digital Currency, the blockchain is Centralised, statement by RBI:
![[13] Right now: RBI gives (some) power to other banks.
And those banks get some "autonomy" because...](https://pbs.twimg.com/media/Fi9K1cqUYAA-SLf.jpg)
[14] Via this Centralised system the flow of credit can theoretically take place between RBI and End User, cutting out the intermediary banks.
You might celebrate the move: Okay, great fewer intermediaries
BUT...
You might celebrate the move: Okay, great fewer intermediaries
BUT...
[15] But, this also means: even the loan giving process could be 100% controlled from the top.
And since the ledger (record-keeping system) is centralised, no one gets to see it.
And since the ledger (record-keeping system) is centralised, no one gets to see it.
[16] Money is a form of an independence.
And if the fountainhead gets controlled 100%, you can imagine the repercussions.
More (and unnecessary) financial surveillance is not good.
And if the fountainhead gets controlled 100%, you can imagine the repercussions.
More (and unnecessary) financial surveillance is not good.
[17] Given the complexity of the subject, very few would get the real deal.
But, I would request to genuinely investigate a basic question:
What is the REAL utility of eā¹?
(And, it is not environment, more efficiency etc.
There is no data to back this up).
But, I would request to genuinely investigate a basic question:
What is the REAL utility of eā¹?
(And, it is not environment, more efficiency etc.
There is no data to back this up).
[18] Do consider Retweeting the first tweet, so more people are made aware.
In case you are interested, I have presented a detailed analysis here:
youtu.be
In case you are interested, I have presented a detailed analysis here:
youtu.be
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