Digital Rupee based on Blockchain Technology to be introduced in 2023
According to Nirmala Sitharaman, the Finance Minister of India, there will be a digital currency, which will be regulated and backed by the Reserve Bank of India. FY 2022–23 will be based on blockchain and other technologies. As proposed in Budget 2022, RBI Digital Rupee would allow the central bank to manage currency more efficiently and cost-effectively.
Sitharaman stated the following during a Parliamentary hearing on the Budget 2022–23: “There will be more efficient and less expensive currency management systems with the advent of digital currencies. The Reserve Bank of India, therefore, plans to begin issuing Digital Rupees in 2022 and 2023 utilizing blockchain and other technology.”
According to Sitharaman, the government has also chosen to tax digital asset revenue at a rate of 30%, the country’s highest rate of taxation. A digital asset’s loss can’t be mitigated against other sources of revenue, though, she added.
A central bank digital currency (CBDC) is a currency issued by a central bank
If you’re talking about virtual money, you’re using the term “central bank digital currency” (CBDC). It is an electronic record of a country’s official cash or a digital token of that currency. As a result, it is controlled by the country’s central bank or monetary authority. All governments have full faith and credit for their money.
Finance Minister Nirmala Sitharaman revealed Tuesday during the presentation of the Union Budget that the Reserve Bank of India will establish a digital rupee based on blockchain technology in the upcoming fiscal year 2022–2023. What is commonly referred to as the “Central bank digital money” is expected to be introduced by the RBI using blockchain technology (CBDC)? The central bank should issue digital money to stimulate the digital economy. There will be more efficient and less expensive methods of managing currencies due to the adoption of digital currency. To this end, the Reserve Bank of India has proposed introducing a digital rupee in 2022–2023, according to Sitharaman, who announced it during the budget session.
The digital rupee will enhance the blockchain ecosystem and simplify digital payment systems
The blockchain technology ecosystem in India will benefit from introducing the digital rupee. “This step will aid the growth of the blockchain ecosystem in the economy. According to Sandeep Jhunjhwala, a Partner at Nangia Andersen LLP, the paradox regarding using unregulated digital currencies appears to have been resolved with this proposal, which gives the RBI regulating authority.
The adoption of the digital rupee, according to ICICI Direct, will promote and facilitate electronic payments. This would help minimize printing expenses for the Reserve Bank of India and be a cost-effective payment mechanism. Sunil Gidwani, Partner at Nangia Andersen, claimed that the RBI’s plan to issue a digital rupee would minimize printing costs, lessen settlement risks, prevent time zone concerns, and provide a cost-effective payment method.
Anxieties over privately held cryptocurrencies
The central bank has been examining the digital rupee’s safety and efficiency, hence the announcement of its implementation. In December, RBI Deputy Governor T Rabi Sankar said that it plans to establish two types of CBDC — one for wholesale accounts and one for retail accounts. “The wholesale account-based one has already been completed, but the retail CBDC is more involved and will take longer to complete.” According to the deputy governor, the RBI will distribute digital currencies for a pilot program based on which ones are ready first.
As a private coin that works on blockchain technology, the RBI has voiced concerns about the potential for financial instability. Sanjeev Sanyal, India’s Principal Economic Adviser, said Monday that the government would take a reasonable approach to cryptocurrency regulation. “Financial stability is a concern. A balanced approach will be taken to this issue because of other factors, such as the importance of innovation and so on.”
The launch of the Digital Rupee, India’s Digital Rupee demonstrates India’s recognition of blockchain technology. While the fate of private cryptocurrencies is unknown, the RBI-issued Digital Rupee will usher in a new era of currency management. China, the United Kingdom, and other countries are following suit. Amit Agarwal, Partner at Nangia Andersen, expects further clarity on how the system would work in F22–23.
Central Bank Digital Currency (CBDCs) are also being developed in advanced economies like the United States and China to speed up digital currency adoption. There is a CBDC already in place in the Bahamas. The blockchain technology ecosystem in India will benefit from introducing the digital rupee. The unbanked can be brought into the financial system through CBDCs, which makes it easier to conduct monetary and fiscal policy. Citizens’ privacy may be endangered as a result of these centralized currencies. All across the world, CBDCs are being developed.
In contrast, the Reserve Bank of India has highlighted reservations about the private cryptocurrency, which depends on blockchain technology, stating that it might bring financial instability. Principal Economic Adviser Sanjeev Sanyal suggested that the administration take a balanced approach to laws on cryptocurrencies. “Financial stability is a problem for some people. Considering the other elements, an honest assessment of this issue will be made.”
