Difference between Digital Currency and Cryptocurrency

Difference between Digital Currency and Cryptocurrency – Explained

Difference between Digital Currency and Cryptocurrency

After the announcement in the Union budget of India about a Digital currency to be introduced in the current financial year 2022-23. A lot of people wanted to know what is the difference between Digital Currency and Cryptocurrency. Let’s get to know both one by one to understand its real meaning.

You can read the summary of Union Budget of India by clicking this link here

What is a digital currency?

In the Union budget of India 2022-23, Central Government announced that RBI, India’s Central Bank will issue a Digital currency in the current financial year of 2022 23. Digital Currency are same as currency issued by Central Bank but without a physical form like Banknotes or Coins thus called as Central Bank Digital Currency (CBDC).

What is Central Bank Digital Currency (CBDC)

A Central Bank Digital Currency (CBDC) is a sovereign currency in an electronic form. It is same as currency of the country and is exchangeable one-to-one with the fiat currency. Only its form is different.

CBDC will be regulated by the Central Bank. It would appear as liability (currency in circulation) under Central banks balance sheet. Central Bank Digital Currency (CBDC) uses and electronic record for digital token to represent the virtual form of a fiat currency of a particular country. It is like banknotes minus ATMs.

Arguments for Digital Currency by Experts

Arguments in its favour goes that a digitalised version of Indian currency like Central Bank Digital Currency (CBDC) will boost India’s digital economy but the risk can’t be ignored which are associated with digital form to Central Bank Digital Currency.

Many analyst favours, that digital currency will not only bring convenience and security in digital form like cryptocurrencies but also will be regulated and reserved backed money circulation of the traditional banking system. Digital Currency will be regulated bt Central Bank and thus there is stabilization in its value.

It will mitigate the risk of losses that Indian depositors face while dealing with commercial banks.it will make correspondent banks to settle cross border payments easily.

Some important features of Digital Currency

  • It is a fiat currency.
  • Digital cash can be exchanged with legal currency.
  • This could change the way the Fintech industry works.
  • This is a legal tender.
  • It is a digital form of Indian Rupee.
  • It is different than cryptocurrencies because crypto is a digital asset Digital Rupee is a fiat currency.
  • Digital Rupee can be a stable coin.
  • This will also give a good boost to the Indian economy.
  • It may also be referred to as the country’s crypto.
  • It will work on many other technologies along with Blockchain.
  • China is also working on its own digital currency since 2014, its name is Digital Yuan and China’s digital yuan is available for Wechat users.
  • Based on blockchain technology.
  • Launched by RBI.
  • Regulated by the Reserve Bank of India.

 

How Digital Currency will help residents working abroad

For Indians working abroad sending money home will become cheaper resulting in huge savings for India which we know that it is the world’s top recipient of remittances.
Country that already using digital currency are The Bahamas, China.

Difference between Digital Currency and Cryptocurrency
What is Cryptocurrency

Cryptocurrency are digital assets or money and it’s systems is decentralized which allow for secure online payments. It is based on blockchain technology. Cryptocurrency are virtual currency and non regulated.

It is a peer to peer system that can enable anyone anywhere to send and receive payments. These cryptocurrency are stored in digital wallets. Basic aim of cryptocurrency is to provide security and safety.

First cryptocurrency is Bitcoin founded in 2009 and highest valued among all cryptocurrencies that exists today. To know in detail about the Bitcoin and how to buy the bitcoin you can visit the link by clicking here.

Cryptocurrency are created by a process popularly called as mining which uses advanced computing skills high speed internet to solve complicated mathematical problems to generate coins. Cryptocurrency are not regulated by a single entity, it is in public domain.

Cryptocurrency are non regulated thus its price value is highly volatile. For example one day 1 Bitcoin has a value of 1000 dollar and other day it might goes upto 10,000 dollar or comes down to 500 dollar. So it is highly volatile and one may end gaining profit or loss.

In the latest Budget speech (2022) by Finance Minister of India Mining and Gifting of cryptocurrency will attract 30% tax. So you can see a big country like India is not going to ban the cryptocurrency but trying to regulate it.

 

2 thoughts on “Difference between Digital Currency and Cryptocurrency – Explained”

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