e-rupee or CBDC (Central Bank Digital Currency) is a currency in the digital form which will be based on a technology called decentralized ledger.

The entire system will run on blockchain technology which moderates the entire cryptocurrency system while this will be entirely moderated by RBI.

RBI has announced its digital currency pilot project beginning on December 1st, which is set to proceed in a phased manner in proper manner involving senders and receivers.

The prime objective of the pilot project is to understand the technology’s robustness and efficacy and process the creation of digital rupee, distribution, and storage in real time.

Transactions mode in CBDC will be based both on the P2P and P2M model which is Person to Person and Person to Merchant and can be done just by scanning a QR Code as it is done in UPI.

The RBI has also specifically clarified that the e-Rupee will not be an incentive-bearing currency and you'll be able to convert it into other forms like deposits with banks.

Initially, four major cities have been earmarked for the RBI’s CBDC pilot project and will later extend to other cities in a phased manner.

Unlike the decentralized crypto market, the e-rupee will be based on India’s legal tenders but in a digital model which needs crucial monitoring in order to avert its possible misuse for illegal practices.

How efficiently will it turn out in a middle-income country as India will only get clear after RBI releases the official figures of its pilot study?