India to have its own digital rupee this year, says FM: Budget 2022

CIOReviewIndia Team | Tuesday, 01 February 2022, 07:35 IST

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India will have its own digital currency soon which will use the blockchcain technology, Finance Minister Nirmala Sitharaman announced in Parliament on Tuesday, while presenting the Union Budget 2022.

India will now join a handful of nations to launch its own blockchain currency.

" The upcoming digital rupee cryptocurrency will surely reduce huge capital expenditure for govt of printing currencies However, will the government restrict the circulation supply? If not then that can threaten the stablility of the country’s financial system. Blockchain is a reliable data source, but if the blockchain is hacked, hackers can steal a huge amount of rupee coins that can easily damage the country’s economy which isn’t the case with physical currency, said Abhinav Soomaney, Forensic and Crypto Expert.

Sitharaman said India will have a digital rupee this year, yet the government has not listed the Cryptocurrency Bill has not been listed in the tentative list of 15 proposed legislations that may come up before Parliament during the Budget Session.

Last year the Ministry of Finance received a proposal from Reserve Bank of India for an amendment to the RBI Act, 1934 to enhance the scope of the definition of ‘bank note’ to include currency in digital form.

RBI is working out a phased implementation strategy for introduction of Central Bank Digital Currency with little or no disruption, said Pankaj Chaudhary, Minister of State in the Ministry of Finance, in a written reply.

"Introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk. Introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option. There are also associated risks which need to be carefully evaluated against the potential benefits," said Chaudhary in a written reply.

The Reserve Bank of India has repeatedly cautioned the users, holders and traders of Virtual currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to.

The creation, trading or usage of VCs including Bitcoins, as a medium for payment are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities. As such, they may pose several risks to their users.

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