Print Friendly, PDF & Email

While the intent of central bank digital currency (CBDC) and the expected benefits are well understood, it is important to identify innovative methods and compelling use cases that will make CBDC as attractive as cash if not more. Discuss.

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

4. While the intent of central bank digital currency (CBDC) and the expected benefits are well understood, it is important to identify innovative methods and compelling use cases that will make CBDC as attractive as cash if not more. Discuss.

Difficulty level: Moderate

Reference: Indian Express/Insights on India

Why the question:

The first pilot in the Digital Rupee, Wholesale segment (e₹-W) will commence on November 1, 2022, the Reserve Bank of India (RBI) said in a circular.

Key Demand of the question:

To write about CBDC, its potential benefits and challenges associated with it.

Directive word: 

Discuss – This is an all-encompassing directive – you must debate on paper by going through the details of the issues concerned by examining each one of them. You must give reasons for both for and against arguments.

Structure of the answer:

Introduction: 

Start by explaining the emerging concept central bank digital currency (CBDC)

Body:

In the first part, write about potential benefits that India can accrue from CBDC. financial inclusion, the cashless society, decrease the cost of printing, expanding the digital economy and empowering citizens etc.

Next, write about potential challenges with regards to CBDC. User adoption, security, complexity, and scalability etc.

Conclusion:

Conclude with way forward.