RBI Creates Panel to Create Rupee-based Digital Currency; To Eventually Replace Paper-based Currency

Last week, we reported that India's central bank, Reserve Bank of India (RBI), has formed a new unit to supervise and oversee its efforts in emerging technologies including cryptocurrency, blockchain and Artificial Intelligence (AI). Now in a latest development to this, RBI has constituted an inter-departmental panel to study the desirability and feasibility of launching its own Fiat-currency. The proposed Digital or Virtual Currency (VC) will be Rupee-based which could eventually replace paper or metal-based currency currently in circulation, said the RBI's Annual Report 2017-18.

"In India, an inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency," said RBI in the report.

To recall, exactly a year back, RBI was contemplating to launch cryptocurrency called 'Lakshmi', which was the result of examination done by group of experts at RBI for the possibility of cryptocurrency which would become an alternative to the Indian rupee for digital transactions, and unlike bitcoin which is a non-fiat digital currency, Lakshmi would be fiat-cryptocurrency. 'Fiat currency' means a currency that is forced into circulation by a government.

In the latest Annual report of RBI, the central bank cited increasing costs of managing paper or metallic currency as a reason for looking to introduce a digital currency. According to a report by India Today, the total cost of printing paper-based currency/notes in India stood at Rs 636 crore in FY'2017-18. It also cited rapid changes in the payments industry, along with the emergence of private digital tokens like Bitcoin, as factors for considering to launch a central bank backed digital currency.

The RBI report said, "Rapid changes in the landscape of the payments industry, along with factors such as emergence of private digital tokens and the rising costs of managing fiat paper/metallic money, have led central banks around the world to explore the option of introducing fiat digital currencies."

Since the increase in popularity of virtual currency like Bitcoin in India, RBI is being very vocal about "Fiat Money". Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity like gold or petrol, which is in the case of Fiat Currency like Rupee.

The U.S. dollar is considered to be both fiat money and legal tender. Legal tender is any currency that a government declares to be legal. Many governments issue a fiat currency, then make it legal tender by setting it as the standard for debt repayment.

U.S dollars are now backed by the U.S. government -- making it fiat money -- and, as legal tender, is accepted for both private and public debts.

In October last year, Dubai unveiled its very first official state cryptocurrency called 'emCash'. emCash was developed in partnership between UK-based blockchain startup Object Tech and Emcredit, a subsidiary of Dubai Economy.

Fiat money serves as a good currency if it can handle the roles that an economy needs of its monetary unit: storing value, providing a numerical account and facilitating exchange.

For the uninitiated, Bitcoin is the first, and currently the biggest digital currency- a decentralised tradable digital asset. The best part about the currency is that it is almost impossible to trace a bitcoin transaction back to a physical person. This particular feature makes it a hit among the dark world as it offers them an anonymity that no other currency in the world provides.

Last year, Jamie Dimon, the head of JP Morgan, the leading global financial services firm and one of the largest banking institutions in the United States, had completely dissed the currency saying that Bitcoin is actually a fraud that will ultimately blow up.

Via - Medianama \ References - Investopedia

Top Image by Ishant Mishra on Unsplash

Meet COO-Paisa - A Digital Currency Launched By An Indian Co-Operative Bank

It has been more than a month since the demonetisation surprise was dumped upon us by the Modi government. Whether we will be able to see all the long term benefits promised by the government is something that only time will tell, but for now the country is deeply bearing the brunt of the temporary cash scarcity created with 86% of liquid currency out of circulation.

In order to help out the Indian cooperative sector during this cash crunch period, Thenhipalam Cooperative Bank, a primary cooperative bank in Malappuram, Kerala, has come up with its own digital currency app CooPaisa. With the app, the bank is directly taking on the currently visible hegemony of e-payment wallets in the country which requires a smartphone and internet connection to operate.

The CooPaisa mobile application facilitates e-payment service to hundreds of people who have accounts at the Thenhipalam Cooperative Bank. In an effort to provide a smooth experience to its customers, the Malappuram branch of the bank has made arrangements with taxis, local shops, autorickshaws, and fish vendors within a 20 km radius of the bank.

The innovative e-payment payment solution has successfully enabled more than 21, 000 bank customers and 1000 merchandise shops in the bank's perimeter to make day-to-day purchases or pay for a taxi ride without making use of any currency.



The mobile app can be used by both vendors and customers. In order to pay for a purchase, the customer is required to scan the QR code available at the vendor's shop and type in the amount to be payed to the vendor. Once typed and okayed, the amount gets instantaneously transfered from the customer's bank account to the vendor's bank account. If in the case, the customer is a little apprehensive of the method, the vendor can help in the payment solution without compromising the security. Both the parties will be sent SMS confirmation about a successful transaction.

Since CooPaisa deducts the amount to be paid directly from one's bank account, it is much easier to use when compared to mobile wallets which need to be constantly filled when they run out of balance. Further, one other point which makes COOPaisa better than the e-wallets is the fact that it can also work without smartphones, by authenticating transactions by using one-time-password (OTP) alone.

For now, Thenhipalam Cooperative Bank hasn't set any minimum limit for the transaction using the COOPaisa app, and customers can easily make purchases for ₹1 to ₹10,000 per day.

While card payments might prove to be more profitable for retail chains and a number of other establishments, but when it comes to small businesses, the high cost of the device and service tax involved makes it a not so lucrative option to implement. In addition to this, the transaction charges that are applied by the card networks act as a major hindrance for the general public to make a switch from hard cash to card payments. The CooPaisa mobile app manages to solve all these aforementioned problems associated with card payment system all at once.

Currently, the app is available for customers in six panchayats - Chelembra, Vallikkunnu, Pallikkal, Thenhipalam, Munniyur and Peruvallur.

According to Thenhipalam Cooperative Bank, it had originally ended up mooting the CooPaisa mobile app project about 3 months back as they had never even thought about such a contingency at the stage of planning. However, the demonetisation drive immensely helped them in popularising CooPaisa.

The bank predicts that about more than 4000 of its customers will make use of the facility as within just three days of the app launch, it received more than 1,200 downloads.

Forget Bitcoins, Meet Zcash - A New Harder-to-Trace Virtual Currency

A new digital currency has made its debut and has taken over the whole town in no time. Meet Zcash, a new virtual currency, that has been conceived and executed by meticulous university academics to be entirely untraceable. Yes, untraceable.

As of this Monday, investors were readily paying over a whopping $1,000 for a single unit of Zcash. It has only been a few days that the currency has been brought online.

Led by Zooko Wilcox, Zcash has been able to garner great support from some of the top most, respected computer scientists and privacy activists at the prestigious Massachusetts Institute of Technology and Johns Hopkins University. Further, it has raked in an impressive $3 million in backing, courtesy a number of Silicon Valley venture capitalists having deep interest in the virtual currency industry.

According to Zcash's developers, they have put in an extra effort to come up with a virtual currency that makes use of advanced cryptography so as to give birth to a virtual currency that be used without any trace, unlike the now in-famous Bitcoin.

Bitcoins were initially endorsed as an anonymous currency, but it later came into notice that all its transactions were being recorded on a public ledger that could be easily tracked and traced by law enforcement. Everyone using the Bitcoin has an address, which is made up of numbers and letters, and these can be easily linked to a real person by the authorities by putting to use a sophisticated data analysis.

In order to counter Bitcoin's this glitch, Zcash developers decided to make use of zk-Snark, a method developed by a team of top cryptographers at M.I.T. and in Israel-- that allowed the Zcash transactions to be confirmed by the network without any recording of the involved Zcash addresses. There is also an option to opt out of this privacy function.

However, these privacy features of Zcash could act as a roadblock for the currency when it comes to winning support of bankers and regulators.

In the past, we have witnessed investigators making use of Bitcoin’s ledger, known as the blockchain, to search down people who are involved in the business of selling drugs for Bitcoins on various black market websites.

There has been a proliferation in the numbers of such websites since the Silk Road, a popular black market site, was taken off the web in the year 2013.

Since then, a vast majority of mainstream financial institutions have developed a taste in virtual currencies, especially in the blockchain technology, which has opened a new decentralised way to keep financial records and to power transactions of all sorts. In fact, major central banks all around the bank have also talked about the possibility of using the technology in the near future for their own currencies. However, a large proportion of the projects in the virtual currency sector, are currently trying to make it easier to integrate virtual currency with the existing financial system.

Since Zcash's opaqueness can become a problem for the virtual currency, its developer Zooko Wilcox has decided to host an open virtual meeting with law enforcement officials as to explain them the entire project.

According to Mr. Wilcox and the programmers behind Zcash, their sole purpose behind developing an untraceable virtual currency is to provide privacy for people who do not want their financial transactions to be visible to the world, and not to facilitate any type of illegal activity.

For now, the strategy is to release Zcash slowly to computers that help support the network underlying the currency. The new Zcash units will be distributed until there are 21 million of them available in the world. The project is being run by a for-profit Delaware corporation, Zcash Electric Coin Company, which is again being led Mr. Wilcox.

Monero, another relatively new virtual currency, had also come with an anonymity built into the system, but it was seized upon by speculators earlier this year who increased Monero's value significantly before the price nosedived. Unlike Wilcox' Zcash, Monero is already being used for purchases on various black market websites.

[Top Image-bitcoinmagazine.com]