A simple introduction to this answer can revolve around a general statement about the digital currency launched by Reserve Bank of India and how is is different from cryptocurrencies.

Central Bank Digital Currency (CBDC) is a digital legal tender issued by the RBI. It is the same as the fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different — it is not paper (or polymer) like physical cash.

It is a fungible legal tender, for which holders need not have a bank account. CBDC will appear as a ‘liability’ (currency in circulation) on the RBI’s balance sheet.

The CBDCs are backed by the RBI, and the e-rupee is not comparable to private virtual currencies like Bitcoin. The cryptocurrencies are not commodities or claims on commodities as they have no intrinsic value; claims that they are akin to gold seem opportunistic.

The cryptocurrencies are not backed by the Central Banks and there is no issuer, they do not represent any person’s debt or liabilities.

Body

You may incorporate some of the following points in the body of your answer:

Need for e-rupee

— To reduce the operational costs in managing physical cash and bring efficiency in payment systems.

— To boost innovations in cross-border payments.

— To quell concerns over money laundering, terror financing and tax evasion with private cryptocurrencies.

Benefits

CBDC has the potential to provide significant benefits such as reduced dependency on cash, higher seigniorage due to lower transaction costs, and reduced settlement risk.

According to the RBI, it will reduce the cost of printing, transporting, storing and distributing currency.

CBDC can also enable more real-time and cost-effective globalization of payment systems.

It will also enhance settlement efficiency and spur innovation in cross-border payments and offer the public the same uses as any private virtual currency without the risks associated with it.

The digital rupee based on transparent and efficient technology will provide customers with continuous access to the payment system, whether wholesale or retail.

Conclusion

Your conclusion should be short.

Central banks around the globe have been studying and working on digital versions of their currencies for retail use to avoid leaving digital payments to the private sector amid an accelerating decline in cash.

The introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option.

Other Points to Consider

How can an individual use the e-rupee?

How is this different from other wallets?

Limitations in the adoption of CBDC