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RBI will issue digital rupee cryptocurrency in 2022-23, says Finance Minister Nirmala Sitharaman

The CBDC is seen as the RBI’s response to the rapid growth in adoption of private cryptocurrencies among Indian investors.

Digital Rupee using blockchain technology will be issued by the Reserve Bank of India (RBI) starting 2022-23, Finance Minister Nirmala Sitharaman said in her Budget 2022-23 speech in Parliament.

“Introduction of Central Bank Digital Currency (CBDC) will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system.” – Nirmala Sitharaman

While the CBDC has been in the works for a while now, this is the first official announcement specifying a timeline for its launch. The CBDC is the government’s attempt to take advantage of the benefits offered by blockchain technology and to also discourage the use of private crypto like Bitcoin as currency.

According to the Atlantic Council, over 90 countries including the US, China, Russia, and many in the EU are exploring CBDCs. So far, only nine of these countries have launched a digital currency.

What are the benefits of CBDCs?

In response to a parliamentary question, the government last December highlighted the following benefits of CBDCs:

  1. Reduced dependency on cash
  2. Higher seigniorage due to lower transaction costs (seigniorage is the profit made by a government when issuing currency, calculated as the difference between the face value of coins and production costs)
  3. Reduced settlement risk
  4. More robust, efficient, trusted, regulated, and legal tender-based payments option
  5. Will not have volatility which is normally associated with private cryptocurrencies

“The proposed launch of a Rupee Digital Currency is likely to act as a catalyst in the development of a future value transfer platform that will help to create a more resilient, innovative, and competitive payment system for households, businesses, and the economy as a whole. The impending digital rupee will undoubtedly lower the government’s massive capital expenditure on currency printing,” Nakul Batra, Associate Partner, DSK Legal, told MediaNama

Despite these benefits, there are associated risks that need to be carefully evaluated against the potential benefits, the Finance Ministry added in its response. “Although blockchain is a trustworthy data source, however, if hacked, serious and enormous economic consequences may follow, which is not a use case with physical currency,” Batra said

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Reaction from Indian crypto companies

Welcoming the move, Nischal Shetty, Founder and CEO of WazirX, tweeted:

Sumit Gupta, Co-founder and CEO at CoinDCX, said:

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