India’s much-awaited Digital Rupee currency (e-Rupee) was launched in the country a few days back. Its wholesale segment commenced from November 1, 2022, and Retail on December 1, 2022. In one way it is a very important historical event and in another, it is a minor one.
Minor thing is that the digital transaction of rupees and paisas is no longer a novelty for us. E-Rupee (Central Bank Digital Currency, CBDC) has just started, but for the past few years, we have been paying and receiving money digitally by scanning QR codes, phone numbers or online transfers without taking money out of our pockets. In short, e-Rupee is just a new step in the journey of the digital economy. In that way, it is a small step.
But this matter is historical in two ways. The first thing is that we are ahead of the developed countries of the West, including the US, in implementing such a government-official digital currency. Those countries are still considering the possibility of digital currency, while we have implemented it. Another thing is that what seems to be a small step at the moment can have such a huge impact in the future that after a few decades or centuries from now currency notes and coins may completely disappear in India. Then there will be only e-Rs. If that happens, the people of that time will show off today’s notes and coins as collector’s items. Given all these possibilities, the launch of e-currency can be considered a very important historical moment.
The basic point in the whole thing is why the need for e-currency?
Cryptocurrency is the real reason why countries around the world are feeling pressure to launch digital currencies. Private currencies like Bitcoin are gaining popularity around the world. Digital currencies came early as cryptocurrencies became popular. If cryptocurrencies did not exist, it is possible that the era of official digital currencies would have either never started or would have started very late, because even without digital currencies, people would have already adopted digital transactions.
Governments around the world are wary of cryptocurrencies. They thought private currencies would compete with our official (paper-coined) currencies and we’d just sit on our hands? If people love cryptocurrencies so much, why doesn’t the government itself issue its own, government-controlled, secure digital currency as an alternative to private and risky cryptocurrencies without all these government controls? correct. must be released. The matter is about protecting people’s money. So control is necessary.
However, the game of control is two-sided. On the one hand, it is a fact that official currencies are tightly controlled by the country’s central bank, such as our Reserve Bank of India, and private currencies such as Bitcoin are largely unregulated by the government. On the other hand, there is also the fact that ultimately the Reserve Bank can increase or decrease the e-Rupee (or simple coin-note currency) as it sees fit, keeping in mind the need and interest of the country, but the volume of private cryptocurrencies does not fluctuate. E.g. Since the launch of the private cryptocurrency Bitcoin in 2009, it was certain that it has a total of 2.1 million and will continue to be mined slowly as if digging gold out of a mine. Due to mining in this way, only twenty lakh bitcoins are left to be mined and put in the market as of today, and approximately by 2040, all in all, 2.1 crore bitcoins will be put in the market.
In this way, private cryptocurrencies are more regulated than government digital currencies, as they are not allowed to increase, governments and central banks can increase the amount of currency on their own when they feel it necessary.
What do you think, where did the dollars that were given to all citizens for free in America, following the outbreak of Corona, come from? The simple yet correct answer to this question is: from the air.
Private cryptocurrencies claim that we do not create money out of thin air. However, in my last Sunday article, I talked about how a 29-year-old young man named Sam Bankman-Fried blew a big hole in this claim and how his crypto exchange called FTX collapsed due to FTT (Fungible Trading Tokens) ‘spawned out of thin air’.
Given this case, the claim that the number of private cryptocurrencies is limited and this self-regulation makes it ‘well mannered’ cannot be just taken for granted. It has been proven that even private currencies can, and do, fluctuate a lot in private.
So overall, the game of controls on currencies is very difficult.
The names and forms of currencies are pompous. But if the whole issue of currency is to be understood in a very simple way, then just note that what matters is the real metal, not the name-form. According to that account, the real currencies are gold, silver, oil, grains and all such solid commodities, which cannot be created out of thin air and over which the control of ‘nature’ is there which is the government of all the governments. Control of nature is most true and so, since ages mankind has been crazy about ‘gold’ which was like a universally accepted precious commodity or medium of exchange or parameter of wealth. Economics which is aligned with nature will sustain otherwise we’ve seen empires collapsing through liquidation riding over inflation and deflation.
Kalpesh has a rich experience of 10 years of handling and leading various projects. He is an independent freelancer associated with Academic Institutions and Social Organizations. He can be mailed at kalpeshsavan@gmail.com
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