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What is meant by central bank backed digital currency? Discuss  its potential applications in the economy?

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

6. What is meant by central bank backed digital currency? Discuss  its potential applications in the economy? (250 words)

Reference:  Indian Express

Why the question:

The government, which plans a law to ban private digital currencies, favours a digital currency backed by the Reserve Bank of India.

Key Demand of the question:

Explain what you understand by digital currency backed by Central bank.

Directive:

Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer:

Introduction:

Start with the definition of Digital currency.

Body:

The answer body must have the following aspects covered:

Explain what you understand by RBI backed digital currency.

Discuss the current challenges associated with regulation of digital currency in India, discuss the efforts of the government in this direction.

Elucidate upon the potential applications of it in the economy.

Conclusion:

Conclude with significance.