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Digital Euro

Digital Euro

The European Central Bank (ECB) is in the process of developing a digital euro. The “preparation phase” of this project began in November 2024.

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  • Digital euro will allow people to pay directly from a digital wallet on smartphones or computers, eliminating the need for a bank or payment gateway.
  • The Reserve Bank of India (RBI) is exploring collaborations with the US and the EU for the digital rupee’s development.
  • India also plans to extend its partnership with the UAE for a cross-border pilot of Central Bank Digital Currency (CBDC).

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Key Features and Differences from Current Digital Payment Options

  • Direct Issuance by ECB: Unlike other digital payment methods that rely on bank-managed systems, the digital euro would be directly issued and managed by the ECB, functioning as a digital equivalent of cash.
  • Microtransactions and Cost-Effectiveness: The ECB envisions the digital euro as a cost-neutral option for processing microtransactions, which are currently costly with traditional banking fees. 
    • This could enable new digital business models and reduce reliance on intermediaries.
  • Offline and Anonymous Transactions: The digital euro is designed to support offline payments, potentially offering a level of anonymity similar to physical cash.
    • Depending on the end device, the money can be transferred via Bluetooth, a browser extension or a smartphone contact.

Models Of Issuance of Digital Currency

Digital Euro

About Central Bank Digital Currency (CBDC or e-Rupee)

  • It is a legal tender issued in digital form and was  launched by RBI in 2022.
  • Currency Type: It is equivalent to fiat currency and can be exchanged one-to-one with it.
    • Fiat Currency is a national currency not tied to commodities like gold or silver.
    • Holders have the freedom to convert Digital Rupee into physical cash through commercial banks
    • Its issuance follows the central bank’s financial policies.
  • Block chain-based: CBDCs are transacted using blockchain-backed wallets.
  • Backed by Central Bank: Unlike private cryptocurrencies, CBDCs are stable and trustworthy as they are backed by the central bank.
  • Programmable Money: CBDCs can have programmable features, such as smart contracts, enabling automated, self-executing financial agreements.It can be programmed to expire, incentivizing consumers to use it by a specific date.
  • Categories: The RBI has classified the digital rupee into two categories:
    • General Purpose (Retail): Accessible to the public for regular use.
    • Wholesale: For specific functions and accessible to financial institutions.

Significance of Central Bank Digital Currency

  • Direct Bilateral Exchange: Countries could directly exchange digital currencies bilaterally without needing SWIFT or other settlement systems.
  • Cost Reduction: CBDC can lower currency management costs by enabling real-time payments without inter-bank settlement.
  • Cash Replacement in India: Given India’s high currency-to-GDP ratio, CBDC can reduce reliance on cash, minimising costs associated with printing, transporting, and storing paper currency.
  • Additional Benefits:
    • Reduced cash dependency.
    • Higher seigniorage due to lower transaction costs.
    • Lower settlement risks for transactions.

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CBDC VS UPI

Digital Euro

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 Final Result – CIVIL SERVICES EXAMINATION, 2023.   Udaan-Prelims Wallah ( Static ) booklets 2024 released both in english and hindi : Download from Here!     Download UPSC Mains 2023 Question Papers PDF  Free Initiative links -1) Download Prahaar 3.0 for Mains Current Affairs PDF both in English and Hindi 2) Daily Main Answer Writing  , 3) Daily Current Affairs , Editorial Analysis and quiz ,  4) PDF Downloads  UPSC Prelims 2023 Trend Analysis cut-off and answer key

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 Final Result – CIVIL SERVICES EXAMINATION, 2023.   Udaan-Prelims Wallah ( Static ) booklets 2024 released both in english and hindi : Download from Here!     Download UPSC Mains 2023 Question Papers PDF  Free Initiative links -1) Download Prahaar 3.0 for Mains Current Affairs PDF both in English and Hindi 2) Daily Main Answer Writing  , 3) Daily Current Affairs , Editorial Analysis and quiz ,  4) PDF Downloads  UPSC Prelims 2023 Trend Analysis cut-off and answer key

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UDAAN PRELIMS WALLAH
Comprehensive coverage with a concise format
Integration of PYQ within the booklet
Designed as per recent trends of Prelims questions
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Quick Revise Now !
UDAAN PRELIMS WALLAH
Comprehensive coverage with a concise format
Integration of PYQ within the booklet
Designed as per recent trends of Prelims questions
हिंदी में भी उपलब्ध

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