UPSC Prelims PYQ 2024: Digital rupee — true statements

Consider the following statements in respect of the digital rupee:

It is a sovereign currency issued by the Reserve Bank of India RBI alignment with its monetary policy.
It appears as a liability on the RBI’s balance sheet.
It is insured against inflation by its very design.
It is freely convertible against commercial bank money and cash.

Digital Rupee or e₹ is India’s Central Bank Digital Currency (CBDC). It is the digital form of India’s physical currency, the Rupee (₹). e₹ is issued by the Reserve Bank of India (RBI) in digital form and offers features similar to physical cash, like convenience of use, guarantee of RBI, finality of settlement, etc. e₹ is stored in the user’s digital wallet and can be used to receive/send money, and/or make payment for transactions, just like any physical ₹ note.
In terms of Section 26 of the Reserve Bank of India (RBI) Act, 1934, every ₹ bank note shall be legal tender at any place in India in payment or on account for the amount expressed therein and is guaranteed by the Central Government. e₹, being a digital form of the ₹ bank note, is legal tender and is the liability of the Reserve Bank of India.

The digital rupee is not inherently insured against inflation. Its value can still erode due to inflation, just like physical currency.

e₹ is a digital form of ₹ whereas UPI is a means of payment. In addition to being used for payments, e₹ also serves as a ‘store of value’, i.e., e₹ can be withdrawn from one’s bank account and kept separately in the e₹ wallet.

Cryptocurrencies and CBDCs are both blockchain-based digital currencies.
Private companies or individuals generally run cryptocurrencies.	CBDC is controlled and tracked by a country’s central bank and corresponds to that country’s fiat currency.
Bitcoin’s price may vary by hundreds or even thousands of dollars in a short period of time due to speculations.	A CBDC issued by the Central Bank would (ideally) be worth as much as its physical counterpart.
Investors often buy large quantities of Bitcoin or other cryptocurrencies and hold them in the hope of making a profit.	CBDCs are not meant to be investment vehicles.