Explained: What is Digital Rupee, when will it come and how’s it different from private cryptocurrencies? 10 critical questions answered
Union Finance Minister on February 1 said the Reserve Bank of India (RBI) will launch a central bank digital currency (CBDC) in 2022-23, marking the first official statement from the Union government on the launch of the much-awaited digital currency.
The FM said introduction of CBDC will boost the digital economy and it will be based on the blockchain technology. The Reserve Bank of India (RBI) had earlier indicated that CBDC is on the cards even as the central bank is against the idea of permitting private virtual currencies.
Sankar said the introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs and reduced settlement risk.
Sankar outlined certain risks associated with CBDCs, saying the availability of these currencies will make it easy for depositors to withdraw balances if there is stress on any bank. "Flight of deposits can be much faster compared to cash withdrawal," Sankar said.
The government announced taxing private digital assets at 30 per cent which is widely seen as indirect recognition to the existence of these instruments. But, it doesn’t mean that these assets are legally recognised in the true sense. There is a debate on this point. At the same time, CBDC may happen sooner, going by the indications available so far.
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