Digital Currency in India
India's first Central Bank Digital Currency (CBDC) was announced in the Union Budget 2022-23. The RBI-issued digital currency will be launched from the year 2022-23 onwards.
The Digital Rupee differs from other cryptocurrencies in that it is authorised by the Government of India and is issued by the country's central bank. This virtual currency would be based on blockchain and other cutting-edge technologies that would make it on par with other popular digital currencies currently being used in India.
In July 2021, the Reserve Bank of India (RBI) had announced that the CBDC would be rolled out in a phased manner. Although the final regulatory policies regarding this digital money are yet to be finalised, here's all you need to know about it:
What is a Digital Rupee?
Here are the important points to be noted about the digital rupee which will be issued by the RBI:
- The digital rupee will be a digital token of the official currency of India.
- It is a legal tender issued only by the RBI.
- It will be the electronic form of the sovereign currency.
- It may be exchangeable with cash.
- It will be recorded as currency in circulation
Features of the Digital Rupee:
Some of the important features of the digital rupee will be:
- It will be numbered in units like bank currency
- Included in the currency in circulation
- A medium of exchange
- Standard of deferred payment
- Store of value
- All transactions would be traceable due to the use of blockchain technology
The Digital Rupee will help to boost India's rapidly growing cashless economy substantially. It will facilitate a more cost-effective and seamless currency management system.
Advantages of CBDC
The CBDC has the following advantages over other virtual currencies:
- Does not require an inter-bank statement
- Payments are final so settlement risks are reduced
- Similar to a UPI system
- Similar to cash being handed over
- Enables globalisation of payment systems in a cost-effective manner
- Enables seamless real-time payments globally without the requirement of an intermediary
FAQs on Digital Currency
- Is the Digital Rupee a cryptocurrency?
No, the Digital Rupee issued by the RBI is different from cryptocurrency. It will be a legal tender similar to paper currency.
- When will the RBI's digital currency be launched?
While a specific date has not been announced yet, the digital currency issued by the RBI is tentatively to be launched by 2022-23.
- Can the CBDC be used to settle payments abroad?
Yes, the CBDC can be used for settling financial payments in other countries.
- Can the RBI's digital rupee be used for settling inter-bank payments?
Yes, the RBI's digital rupee can be used for inter-bank settlements as well.
- Will the tax on digital assets be applicable to RBI's digital rupee?
While regulatory compliances for RBI's digital rupee have not been announced, the 30% tax on digital assets may not apply to the CBDC because it is a legal tender just like paper currency and not just a digital asset like a cryptocurrency.
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