Cryptocurrency vs Digital Currency
Digital Currencies Vs. Cryptocurrencies –Finance Minister Nirmala Sitharaman during her Budget 2022-23 speech on February 1 announced a 30 per cent tax on any income from transfer of digital assets, including cryptocurrencies and non-fungible tokens (NFTs). And, soon after, the Finance Minister also announced India’s digital currency. The Finance Minister said that the Reserve Bank of India (RBI) will soon issue its digital currency. Central Bank Digital Currency (CBDC) may be issued any time in the financial year 2022-23.
The announcement of CBDCs soon after the announcement of taxation for digital assets has left many wondering whether CBDCs will also be taxed. This happened because most people consider cryptocurrency and digital currency to be the same. However, Finance Minister Nirmala Sitharaman made it clear in a press conference after the budget speech that cryptocurrency (she only said crypto, did not add currency in front of it) is not a currency. Currency is that, which is issued by the central bank, which it will issue this year.
Difference between cryptocurrency and digital currency?
Cryptocurrency vs Digital Currency – Digital currency is essentially an electronic form of government-issued currency whereas cryptocurrency is a store of value, secured by encryption. Cryptocurrencies are called digital assets whereas digital currency is not a digital asset. The digital wallets that people started using especially during the pandemic can have both digital currency and cryptocurrency but these two are not interchangeable.
Digital currency is the electronic form of existing paper money (note). It can be used in contactless transactions, such as making payments to someone else electronically from your bank account. All online transactions involve digital currency. However, when you withdraw that money from a bank or ATM, that digital currency turns into liquid cash.
A cryptocurrency is a store of value, protected by encryption. Cryptocurrencies are privately owned and are created using advanced blockchain technology. Cryptocurrency is not yet regulated in most countries. However, digital currency is regulated by the central bank.
Digital currency does not require encryption but requires all users to secure their digital wallets and banking apps with strong passwords and biometric authentication to reduce the chances of hacking and theft. The same applies to debit and credit cards, which are used to transact in digital currency.
Cryptocurrencies are protected by strong encryption and to trade in crypto, users must have a bank account, from which they buy cryptocurrency of the respective value online in exchange for digital currency (money in a bank account). Think of it like you have 100 rupees in your bank account and you have bought some goods (whose current price is 100 rupees) in a digital way for those 100 rupees.
Major differences : Cryptocurrency VS Digital currency
Cryptocurrency vs Digital currency: The digital currency is not at all encrypted while the cryptocurrency is highly encrypted. In digital currency, one needs to open an account without any security– at any time your bank account can get hacked and you may lose all the existing cash. But in cryptocurrency, one needs to open an account in a forum with a cybersecurity system to protect all Bitcoins and Dogecoins from severe cyberattack.
CRYPTOCURRENCY VS DIGITAL CURRENCY
|Digital currency is the electronic form of fiat money that can be used in contactless transactions.||Cryptocurrency is a store of value that is secured by encryption.|
|Digital currency is regulated by a central authority (RBI for India)||Cryptocurrency is decentralised and unregulated.|
|Digital currency rates are stable, and currencies are globally accepted.||Cryptocurrency rates are highly volitile, and digital coins are not widely accepted yet.|
|Digital currency transactions are only known to the sender, receiver and the bank.||Cryptocurrency transactions are publicly available on a decentralised ledger.|
|Digital currency needs strong passwords to protect digital wallets, banking apps, credit,debit cards.||Cryptocurrencies are secured by encryption.|
Cryptocurrency vs Digital Currency
Digital currency refers to the electronic form of fiat money issued by governments. They are used for contactless transactions between parties like when you electronically transfer an amount from your bank account to someone else’s. When you pay from your bank account or digital wallet which stores value corresponding to the actual fiat money via an electronic transfer mechanism for a product or service, you are using digital currency. When you withdraw money from an ATM, the digital currency is turned into liquid cash.
Cryptocurrencies, on the other hand, is a store of value secured by encryption. They are often referred to as digital coins. There are several digital coins such as Bitcoin, Ether and Dogecoin. All these crypto coins are privately owned or created and are not yet regulated in most countries. These are created using advanced blockchain technology.