What is CDBC ?

CDBC stands for Central Bank Digital Currency. Thus, it is a national digital currency or digital form of fiat currency of a country. Accordingly, the Reserve Bank of India is also planning to introduce CDBC in the Indian economy. Thus, it allows the issuing of tokens instead of printing currency or minting coins. Accordingly, the token value is backed by the full faith and credit of the government. However, some countries of the world have already initiated the digital currency system in their economy-

Sl no	Country	Digital currency
1.	Bahamas	In 2020, the Central Bank of the Bahamas introduced the “Sand Dollar” as a digital legal currency.
2	Brazil	In 2020, the Central Bank of Brazil also announced plans for a digital currency by 2022.
3	China	However, China’s central bank has been working on a project called DCEP (Digital Currency Electronic Payment)
4	France and Switzerland	Also, in 2021, the Swiss National Bank and Bank of France launched a cross-border CBDC payments trial.
5	European Union	Abandon plans to issue a digital euro toward mid-2021

Need for CDBC

1. Firstly, the growth of unregulated crypto currency such as bitcoin, ethereum etc. increases the need for introduction of well regulated CDBC.
2. Again, the 2021 BIS survey reports highlighted that 

• 86 percent activity researching the potential for CDBC.
• 60 percent are experimenting with technology to introduce digital currency  and digital payment systems.
• 14 percent are deploying pilot projects on digital currency.
• It ensures no requirement for inter-bank settlement.

Benefits of CDBC

1. Firstly, CBDC reduces the cost of currency management like currency print, minting of coins, transportation of currency, safe custody of currency and tracking of currency etc.
2. Secondly, it promotes an efficient way of financial transaction.
3. Additionally, this system prevents the growth of private and unregulated digital currency.
4. Again, it provides protection to investors and users because it is a state backed digital currency.
5. Finally, CDBC is regulated by the RBI in India.

Threats/disadvantages of digital currency

1. Due to no strict regulation of cyber security in India, it creates challenges to the users for data leak.
2. Moreover, most of the population of India is digitally illiterate which will create hurdles for successful implementation of digital currency in india.
3. Again, lose regulation of tracking investment, taxation of individuals, corporates etc. is another threat for introduction of digital currency in India.
4. Finally, it will collect sensitive information of users like identity, fingerprint etc. It may be misused if not properly regulated the data storage system.