- 1 Currency
- 2 Money as Deposits with Banks
- 3 Cheque
- 4 Cryptocurrency
- 5 Non-fungible token (NFT)
- 6 Central Bank Digital Currency
- 7 E-rupee
- 8 FAQs Modern Forms of Money
- 8.1 What is currency, and how does it function in an economy?
- 8.2 What are the different types of bank deposits, and how do they differ?
- 8.3 What is cryptocurrency, and how does it differ from traditional currency?
- 8.4 What is the significance of non-fungible tokens (NFTs) in the digital economy?
- 8.5 What is Central Bank Digital Currency (CBDC), and how does it differ from cryptocurrencies?
- 9 More Articles
Currency
- Currency: paper notes and coins. It is accepted as a medium of exchange because the currency is authorized by the government of the country. Currency notes and coins are therefore called fiat money. They do not have intrinsic value; Also called legal tenders as they cannot be refused by any citizen of the country for settlement of any kind of transaction.
- The Government of India issues coins and notes of Rupee one. The Reserve Bank of India issues currency notes (except rupee one note) on behalf of the central government.
Money as Deposits with Banks
- Demand deposit: deposits in the bank accounts can be withdrawn on demand.
- Term deposit or fixed deposit: deposits can be withdrawn after a stipulated time period otherwise one has to pay a penalty.
Accounts maintained by NRI/PIO
- Foreign Currency Non-Resident (FCNR) Account: Account can be held in any freely convertible foreign currency, exclusively as term deposits. Both the interest and principal are non-taxable and can be freely repatriated.
- Non-Resident External (NRE) Account: Available in Indian Rupees, this account can take the form of Current, Savings, Recurring, or Fixed Deposit. The interest and principal are non-taxable and can be freely repatriated.
- Non-Resident Ordinary (NRO) Account: Maintained in Indian Rupees, this account offers flexibility as Current, Savings, Recurring, or Fixed Deposit. While the principal and interest are taxable, repatriation is restricted.
Cheque
Paper instructing the bank to pay a specific amount from the person’s account to the person in whose name the cheque has been issued. Cheques drawn on savings or current accounts can be refused by anyone, making demand deposits not legal tenders.
Cryptocurrency
A digital or virtual form of currency that uses cryptography for security and operates on a decentralized network typically based on blockchain technology. Notable examples include Bitcoin, Litecoin, Monero, Dogecoin, and Bitcoin Cash. Dinesh Sharma Committee recommended a total ban on cryptocurrencies.
- Bitcoin is not tied to a bank or government and allows users to spend money anonymously.
- Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address.
- Online payments can be sent without either side knowing the identity of the other.
Non-fungible token (NFT)
Serves as a distinct cryptographic asset designed to establish and verify ownership of digital assets.
Central Bank Digital Currency
A digital form of a country’s official currency, issued and controlled by its central bank. It’s essentially like cash but in digital form.
E-rupee
A digital form of legal tender issued by the Reserve Bank of India (RBI) that can be exchanged with traditional fiat currency; Types: Retail E-rupee for general use and Wholesale CBDC for select financial institutions.
FAQs Modern Forms of Money
What is currency, and how does it function in an economy?
Currency refers to paper notes and coins authorized by the government and accepted as a medium of exchange. Known as fiat money, it lacks intrinsic value and cannot be refused for transactions within the country, making it legal tender.
What are the different types of bank deposits, and how do they differ?
Bank deposits include demand deposits, which are withdrawable on demand, and term deposits, which incur penalties if withdrawn before a specified time. Additionally, accounts for Non-Resident Indians (NRIs) come in various forms such as FCNR, NRE, and NRO, each with specific features regarding currency and repatriation.
What is cryptocurrency, and how does it differ from traditional currency?
Cryptocurrency is a digital or virtual currency secured by cryptography and operates on decentralized networks like blockchain. Unlike traditional currency, such as fiat money, cryptocurrency like Bitcoin is not tied to a government or bank and allows for anonymous transactions.
What is the significance of non-fungible tokens (NFTs) in the digital economy?
NFTs are unique cryptographic assets used to establish ownership of digital items. Unlike cryptocurrencies, which are interchangeable, NFTs represent distinct digital assets, such as artworks or collectibles, and are valuable for their uniqueness and proof of ownership.
What is Central Bank Digital Currency (CBDC), and how does it differ from cryptocurrencies?
CBDC is a digital form of a country’s official currency issued and regulated by its central bank. Unlike cryptocurrencies, CBDC is centralized and backed by the government, providing a digital alternative to physical cash while maintaining regulatory control.
