What are the Features of Central Bank Digital Currency (CBDC)

What are the Features of Central Bank Digital Currency (CBDC)

29 April, 2024


  • A CBDC is purely a digital version of physical currencies, issued and regulated by central banks to enhance payment efficiency and financial inclusivity. The e₹ is India’s CBDC.

  • The e₹ operates as an electronic token in a digital wallet, streamlining transactions while reducing the costs linked with physical money.

  • Key features of CBDC include centralised regulation, ease of use, global transaction capability and enhanced security.

Central Bank Digital Currency (CBDC) is the digital version of a country’s physical currency, issued and regulated by its central bank. Unlike traditional currencies, which exist in both physical and digital forms, CBDC is solely digital. The introduction of e₹ or Digital Rupee, India’s CBDC, aims to improve payment system efficiency, decrease cash handling expenses and enhance financial inclusivity. e₹, legally recognised and issued by the Reserve Bank of India (RBI), is a digital substitute for paper cash, designed for peer-to-peer transfers and merchant payments, with potential for future international transaction use.

A digital currency marks a significant advancement in financial transactions, offering benefits like speed, reduced costs, enhanced security and financial inclusion. As digitalisation and global interconnectivity increase, digital currencies are poised to play a more prominent role, potentially reshaping the global financial landscape.


Operational Mechanics of e₹

A big feature of CBDC is that it functions as an electronic token in a digital wallet, offering an entirely digital cash experience. The RBI issues e₹ in token form, akin to existing physical currency denominations. These tokens are distributed to Token Service Providers (TSPs) like banks through a seamless online process. This system can potentially cut costs associated with physical money.

Customers acquire e₹ through banks, using digital wallets. Users withdraw or convert cash into e₹ via platforms like the Unified Payment Interface (UPI). Banks might offer instant transfers from accounts to digital wallets. RBI ensures security with systems that uniquely number each e₹ token. In case of device loss, wallet providers restore the token value.

The introduction of e₹ is a significant advancement in India's digital journey, providing a modern, secure and efficient currency alternative.

Features of CBDC

There are numerous features of CBDC. These include:

Centralised regulation: Unlike decentralised cryptocurrencies, e₹ is regulated and backed by the RBI, offering trust and stability. It ensures legal compliance and acceptance by the Indian Government.

Transparency: e₹'s unique traceability and potential programmability allow for sophisticated transactions. Recorded on blockchain-powered ledgers, e₹ ensures transparent transactions.

Global acceptance and cross-border transactions: This CBDC feature facilitates international transactions, broadening its utility for global trade and remittances.

Accessibility without bank accounts: One of the biggest features of CBDC is that it doesn't require a bank account for transactions, increasing accessibility in unbanked regions.

Real-time payments and operational cost savings: This CBDC feature enables swift settlements and reduces costs associated with physical banknotes.

Durability and longevity: Digital currencies like e₹ are not prone to physical damage, offering a longer lifespan.

Combating fraud: e₹'s design proactively prevents financial fraud. It brings efficiency and resilience into currency management, addressing fraud and financial malpractices.


As an HDFC Bank customer, you can be a part of the advanced digital transaction movement. The RBI creates tokens for the Digital Rupee, allocated to TSPs. These tokens, functionally like cash, are distributed to users. You can store your digital rupee in the HDFC Bank CBDC app, your Bank’s dedicated digital wallet. This wallet operates digitally, ensuring secure and straightforward transactions. This shift towards CBDC, especially in countries like India, highlights a transformative movement in the financial sector, emphasizing digital solutions for a more connected and efficient financial future. Get started here.

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.

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