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Central Bank Digital Currency ( CBDC)

Writer: Abhinesh Kumar
Abhinesh Kumar
May 18, 2023
2 min read

The key difference between UPI payment and digital currency lies in their underlying mechanisms and the entities responsible for their issuance and guarantees.


1. UPI Payment :

Unified Payments Interface (UPI) is a popular real-time payment system in India that enables seamless transfer of funds between bank accounts. UPI apps facilitate transactions by linking bank accounts to a unique identifier such as a mobile number or a virtual payment address (VPA). When making a payment, funds are transferred from one bank account to another through the UPI infrastructure, which acts as an intermediary.


2. Digital Currency (e-rupee) :

Digital currency, specifically the e-rupee in this context, refers to a central bank digital currency (CBDC) issued and regulated by the Reserve Bank of India (RBI). Unlike UPI payments, which involve transferring funds between bank accounts, digital currency is a form of electronic money issued directly by the central bank. The e-rupee is a liability of the RBI, backed by its guarantee. Its value is independent of the solvency of any specific institution, making it inherently safe and secure.


The key distinctions can be summarized as follows:


a) Issuing Authority : UPI payments are facilitated by banks and payment service providers, whereas digital currency is issued directly by the central bank (RBI).


b) Liability : UPI payments involve the transfer of funds between bank accounts, which are liabilities of the respective banks. In contrast, digital currency is a direct liability of the RBI, ensuring its safety and stability.


c) Guarantee: UPI payments rely on the solvency and reliability of the participating banks, while digital currency is backed by the guarantee of the central bank, making it inherently secure.


Regarding the mention of a hidden agenda or the potential scrapping of high denomination currency, it is speculative and not within the scope of this explanation. The purpose of the blog is to provide an overview of the differences between UPI payments and digital currency. For the latest updates and information, it is advisable to refer to official sources or reliable news outlets.


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