Digital Currency vs Cryptocurrency

 Background:

 A digital currency is a type of electronic money that can be used in contactless transactions. Union Budget 2022 announced that the Reserve Bank of India (RBI) would soon launch its digital currency, the Central Bank Digital Currency (CBDC), in 2023. 

What is Central Bank Digital Currency (CBDC)?

• 
  CBDC is a digital or virtual currency, but it differs from the private virtual currencies and cryptocurrencies that have exploded in popularity over the last decade. 
• Because there is no issuer, private virtual currencies do not represent any person's debt or liabilities. They aren't money, and they aren't even close to being currency. 
• The Reserve Bank of India has been a vocal opponent of private cryptocurrencies, claiming that they could jeopardize national security and financial stability. 
• The Reserve Bank of India (RBI) will issue Central Bank Digital Currency (CBDC), which will be a digital form of legal tender. 

Difference between digital rupee and cryptocurrency 

• The fundamental difference between the digital rupee and cryptocurrency is that the digital rupee, which will be issued by the RBI, will almost certainly be centralized. Cryptocurrencies, on the other hand, are decentralized and cannot be controlled by a single entity. 

Significance of CBDC

• CBDC is the sovereign currency in electronic form, and it would appear on a central bank's balance sheet as a liability (currency in circulation). 
• In addition, the digital currency will result in a more efficient and cost-effective currency management system. As a result, it is proposed that the Reserve Bank of India would issue a digital rupee beginning in 2022-23, based on blockchain and other technologies. 
• Players all over the world have the technology to use cryptocurrency as a form of payment for goods and services.
• Coin base, a cryptocurrency exchange based in the United States, allows merchants to accept cryptos.