Budget 2022: India catches up with global fad of digital currency

business-standard.com:

Crypto or digital currencies are the latest fad across the world and India will next fiscal, beginning April 1, have its own version of the same which essentially would mirror the prevalent physical currency in digital form.

The currency, called 'digital rupee', will be issued by the Reserve Bank in digital form and will be fungible with physical currency.

The exact regulation governing this Central Bank Digital Currency (CBDC) is yet to be finalised.

CBDC is a digital or virtual currency but it is not comparable to the private virtual currencies or cryptocurrency that have mushroomed over the last decade. Private virtual currencies do not represent any person's debt or liabilities as there is no issuer. They are not money and certainly not currency.

The RBI has been vehemently opposing private cryptocurrencies as they could have implications on national security and financial stability.

According to a recent speech by RBI Deputy Governor T Rabi Sankar: "CBDC is the same as currency issued by a central bank but takes a different form than paper (or polymer). It is sovereign currency in an electronic form and it would appear as liability (currency in circulation) on a central bank's balance sheet. The underlying technology, form and use of a CBDC can be moulded for specific requirements. CBDCs should be exchangeable at par with cash." In her Budget speech, Finance Minister Nirmala Sitharaman said that introduction of CBDC will give a big boost to digital economy.

"Digital currency will also lead to a more efficient and cheaper currency management system. 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," she said.

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