MUMBAI: Resident will soon be able to transact In a digital currency backed by the RBI. In a much-anticipated move, the RBI will launch its own digital rupee, using blockchain technology in the coming fiscal year (FY23), FM Nirmala Sitharaman announced while presenting Union Budget 2022-23.
“Introduction of Central Bank Digital Currency (CBDC) will give a big boost to digital economy,” the FM said. “Digital currency will lead to a more efficient and cheaper currency management system.” Though the modalities on usage will be spelt out in due course, currency experts cited RBI’s concerns of cryptos being misused for money laundering, terror funding and tax evasion as the need behind having its own regulated CBDC.
A CBDC is virtual money backed by a central bank unlike cryptos like Bitcoin, Dogecoin, etc, which fall outside the regulatory purview of central banks. Last year, Nigeria launched its own CBDC called the e-Naira. Some analysts believe that Indian use the Liberalised Remittance Scheme (LRS) to invest in cryptos abroad. Sebi recently barred mutual funds from offering Indian investors fund of funds to invest in overseas cryptos until the government enacted legislation to regulate cryptos.
Against this backdrop the launch of digital rupee is seen as a “logical step” by currency market trackers .
“The need for a regulated digital rupee that’s similar to fiat currency and exchangeable with the latter is imperative in the world of cryptos which fall outside of the regulatory pale,” said KN Dey, managing partner, United Financial Consultants. “This move by the government acknowledges that digital currencies are here to stay,” said Shubhada Rao, founder, QuantEco Research.
Modalities to be out in due course
Though the modalities on usage will be spelt out in due course, currency experts cited RBI’s concerns of cryptos being misused for money laundering, terror funding and tax evasion as the need behind having its own regulated CBDC.