Thread by @balajis

A digital rupee will need to do everything a rupee can do. That includes foreign exchange.

Which means the digital wallet that holds digital rupees will have to facilitate trade against *other* national digital currencies.

In practice, this will likely be via crypto exchanges.

https://twitter.com/balajis/status/1364626032771272706

Put another way, a digital rupee won’t be closed off from the global economy.

To the contrary, it will be more freely traded for other assets, domestic *and* foreign, than the current quasi-digital rupees held on bank ledgers.

Just compare USDC to Fedwire to see the future.

Setting up a digital rupee & thinking it can be air-gapped from the cryptoeconomy is like setting up a website & thinking it will only link to itself. 🙂

A website’s value, in part, comes from its links. A currency’s value, in larger part, comes from its links to other assets.

Every asset class is going on-chain —interest, loans, derivatives, art — a phenomenon you can witness in real-time at defipulse.com.

One of the main value propositions of a national digital currency will be an on-ramp to this financial internet. Like stablecoins 2.0.

The less things you can buy with a currency, the less valuable it is. The more it will be sold, and the less it will be held.

This will drive nations over time to permit more use cases for their national digital currencies.