Tag: Digital Currency

Digital currency is an umbrella term for any form of money that exists purely in electronic or digital form, as opposed to physical cash or coins. It’s managed, stored, and exchanged using computer systems, primarily over the internet.

Within this broad category, there are several distinct types:

Cryptocurrencies: These are decentralized digital currencies (like Bitcoin and Ethereum) that use cryptography for security and operate on blockchain technology. They are not issued or controlled by any central authority. In India, cryptocurrencies are legal to hold and trade as “Virtual Digital Assets” but are subject to a 30% tax on gains and 1% TDS.
Central Bank Digital Currencies (CBDCs): These are digital versions of a country’s national fiat currency, issued and regulated by its central bank. India’s Digital Rupee (e₹) is a prime example. The e₹-R (retail CBDC) is currently in pilot mode, allowing users in cities like Surat to transact digitally with the same trust and value as physical rupees, but without physical cash. CBDCs aim to modernize payment systems, reduce the costs of cash management, and promote financial inclusion.
Virtual Currencies: Often found in specific online communities or games (e.g., in-game currencies), these are typically unregulated and controlled by their developers.

Digital currencies offer benefits such as faster transactions, lower fees (especially for cross-border payments), enhanced security through cryptography, and greater financial accessibility. However, challenges like price volatility (for cryptocurrencies), regulatory uncertainty, and potential privacy concerns (for CBDCs) are ongoing considerations. The rise of digital currencies is fundamentally reshaping how we view and interact with money in the global economy.