Blockchain-based digital rupee will be a reality before March 2023 confirms Finance Minister Nirmala Sitharaman
- India’s central bank digital currency (CBDC) is set to go live before the end of March, this year.
- Finance Minister Nirmala Sitharaman confirmed that the Reserve Bank of India (RBI) will be at the helm of launching the ‘
- The digital rupee will run on the blockchain with the aim of making currency management cheaper and more efficient.
India plans to go live with its central bank digital currency (CBDC), the ‘digital rupee’, by March 2023.
While the announcement of a CBDC would project India as being bullish on the blockchain, Sitharaman also unveiled a 30% tax on virtual assets, which includes non-fungible tokens (NFTs), cryptocurrencies and other aspects of the crypto universe.
It is, therefore, proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23.
Right now, the 30% tax rate is only applicable to highest-earning income taxpayers with an income of more than ₹15 lakh.
What is digital rupee?
Digital rupee is a digital currency or a CBDC that will be issued by RBI and will be counted as a legal tender in digital form. The digital rupee, just like fiat currency and traditional cash, will carry a value that can be used just like normal transactions, but digitally.
RBI will be issuing a digital currency, a currency is a currency when it is issued by the central bank. Crypto currency is not a currency, it is a digital asset. RBI will issue digital rupee. The government is taxing digital assets outside of the RBI’s digital rupee.
Simply put, the digital rupee is basically the digital version of India’s fiat currency that’s run using a private blockchain system. Unlike other cryptocurrencies, which aspire to be decentralised — they run on public blockchains — a CBDC is a centralised digital asset since the RBI will be able to control its supply in the market.
“It's phenomenal news that India launching a blockchain-powered ‘digital rupee’. This move will pave the way for crypto adoption and put India in the front seat of innovation,” said Nischal Shetty, the CEO of WazirX, in a statement.
Many experts argue that CBDCs are not ‘technically’ cryptocurrencies due to their centralised nature. Unlike Bitcoin, Ethereum or Solana, CBDCs are designed to be trackable and do not allow any form of anonymity.
India is not alone in the race to raise a CBDC
India is not the first country to experiment with digital legal tender. China is already at the forefront with its digital yuan, which it plans to boost during the upcoming 2022 Winter Olympics.
AdvertisementThe European Union (EU) is also working on launching its own digital euro while the US has been mulling over launching a ‘digital dollar’ for a couple of years now. Singapore, Malaysia, South Africa and Australia are in the midst of testing cross border payments with Project Dunbar.
“Introduction of CBDC sends a clear signal of India being a digital-first, efficiency-driven, and transparency-led system. CBDC with the backbone of blockchain will help us hold a powerful position in the global economy,” noted CoinDCX co-founder Sumit Gupta.
According to the Atlantic Council’s CBDC tracker, there are at least 87 countries around the world — which present 90% of the global gross domestic product (GDP) — who are exploring a CBDC right now.
The key advantages of these CBDCs are reduced printing costs, low settlement risks, easy to implement cost-effective global payment system and more. Moreover, with a CBDC in control of the monetary policy, banks won’t get pushed out of the system as easily.
On the flip side, scalability has been an inherent project with cryptocurrencies. It will be interesting to see how the RBI plans to address that problem as it deals with a population of 1.4 billion.
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