1. MONEY – SPECIAL REFERENCE TO DIGITAL MONEY
By
Dr. S. VIJAY KUMAR
Head & Professor (Associate) of Economics (Retd.),
Kakatiya Government Post Graduate College (NAAC
“A” Grade) Hanamkonda, Warangal District, Ex -
Member of Board of Studies, Kakatiya University,
Warangal Telangana State (India)

2. Money
• Money is derived from a Latin word, Moneta, which was another name
of Goddess Juno in Roman history. The term money refers to an object
that is accepted as a mode for the transaction of goods and services in
general and repayment of debts in a particular country or socio-
economic framework. Money is an important and powerful tool which
was created by man thousands of years ago. “Money is a pivot around
which the whole economy clusters”
• Anything that serves as a medium of exchange, as unit of account
and used as a store value can be referred to as money. It should have
characteristics of Durability, Portability, Divisibility, Uniformity,
Acceptable, Scarcity, Stability, Cognizability means its value must
easily identifiable and compare its worth.

3. Types of Money
•Fiat Money – The main form of money used in economies
today is fiat money. It is a money whose value is not based on
its inherent value but is based on an authoritative i.e., by the
Government. Examples: Rupees, Dollars, Euros etc., and Coins.
•Commodity Money - Its value comes from the commodity it is
made from. Examples: Precious metals like Gold and Silver.
•Representative Money - Like fiat money, it has no value of its
own, but backed by a commodity like gold and silver reserves.
Examples: Gold & Silver Certificates, Paper Money and Token
Coins.

4. Other Types of Money
• Fiduciary Money or Bank Money - Deriving from the Latin word fiducia means
trust. Fiduciary money works on the promise and trust that it will be exchanged for
fiat or commodity money by the issuer (bank). Examples: Cheques, bank drafts.
• Commercial Bank Money or Credit Money – Commercial banks can create
credit money by issuing loans in greater amounts than the reserves i.e., deposits
they hold in their vaults, typically up to 10 times more. Virtually any form of
financial instrument that cannot or is not meant to be repaid immediately can be
termed as a form of credit money.
• Digital Money/Currency - Any Currency, Money, or Money-like asset that is
primarily managed, stored or exchanged on digital computer systems, especially
over the Internet is digital money. Examples: Cryptocurrency, Virtual Currency,
Electronic or E – Money, Central Bank Digital Currency (CBDC). Let we know
the differences between each of them.

5. Differences Between Digital Currency & Cryptocurrency

6. Comparison Between Digital, Crypto & Virtual
Currencies
Digital Currencies Cryptocurrencies Virtual Currencies
Regulated or unregulated
currency that is available only
in digital or electronic form.
A currency that uses
cryptography to secure and
verify transactions as well as
to manage and control the
creation of new
currency units. Example:
Bitcoin.
An unregulated digital
currency that is controlled by
its developer(s), its founding
organization, or its defined
network protocol. Example:
Bitcoin.

7. E – Money
E-Money: It is stored in the banking computer systems.
It doesn’t have a physical form. Nowadays, E-money is
popular because of its flexible and safe features rather
than physical cash. It can be transferred through Debit
Cards, Credit Cards, computer systems and smartphones.
It gives customers the possibility to make bank to bank
transactions fastly and buy goods and services online.
But there is also a danger of cybercrime i.e., possibility
of hacking customer accounts, if safety measures are not
followed.

8. Types of E - Money
•Soft Electronic currency: Reversible transactions are
dealt through soft electronic currency. E-Money transfers
can be done through UPIs/NEFT/RTGS/Credit Cards via
Smart Phones using Net Banking facility.
•Hard Electronic Currency: Non-reversible transactions
are dealt through hard electronic currency, such as those
drawn through a bank. The best part about this type of e-
money is its cost efficiency of operations and limited
paperwork. Example: Western Union, KlickEx, Bitcoin.

9. Central Bank Digital Currency (CBDC)
Central bank digital currency (CBDC) refers to the virtual form of a Fiat Currency.
It is digital form of a country's official currency. As such, it is issued and regulated
by the country’s Central bank. Finance Minister Nirmala Sitharaman announced
during her Budget 2022-2023 speech that digital assets, which includes
Cryptocurrencies such as Bitcoin and Non-Fungible Tokens – NFTs would
attract a 30 per cent tax on any income from their transfer. (NFTs means non-
interchangeable unit of data stored on a Blockchain, a form of digital Ledger, that
can be sold and traded. Each token is uniquely identifiable). This is an indication
that the finance minister would soon be rolling out new digital currency policy. The
announcement of the CBDC just after taxation was announced for digital assets
confused a lot of people into thinking that the CBDC would also be taxed. However,
digital currencies are not digital assets like cryptocurrencies or NFTs. Some
countries, regulated cryptocurrencies, for example – El Salvador became the first
country to accept Bitcoin as Legal Tender. European Union also recognizes Bitcoin
and Other Cryptocurrencies as crypto-assets.

10. We can sum-up, Digital money is the digital representation of
value. The public sector can issue digital money called Central
Bank Digital Currency—essentially a digital version of cash
can be stored and transferred using an internet or mobile
application. The private sector can also issue digital money.
Some forms can be redeemed for cash at a fixed face value.
These are fully backed with very safe and liquid assets and are
usually referred to as e-money. Stable Coins can be a form of e-
money, but also come in other designs whose value is more
volatile. Crypto assets, such as Bitcoin, are issued in their own
denominations and are especially volatile—too much to be
considered a form of digital money (they are usually considered
an investment asset).

11. Future of Digital Currency
New digital currencies like cryptocurrencies are still in the early
days of development. Cryptocurrency values have skyrocketed in
recent years as various companies have expressed interest in
building new services and products with them, and investors have
increasingly viewed Cryptos as an investment asset class.
Central banks that create and back fiat currency may also alter the
landscape if they begin issuing their own digital currencies. The
future for digital currencies and other digital assets utilizing them
is in flux with advancement of new technology.

12. Conclusion
Money whether it is in physical form or in
digital form or in any other form must be
used rationally with utmost care, because
money is money. Otherwise, one has reap
the consequences.