India’s Finance Minister Nirmala Sitharaman announced that the country will have its own digital currency by 2022-23 in her Union Budget 2022 speech in the Parliament on Tuesday.
The digital rupee will be introduced by the Reserve Bank of India (RBI) next year and will be based on blockchain technology.
"Introduction of Central Bank Digital Currency (CBDC) will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” Sitharaman said in her Budget speech in Parliament.
“It is, therefore, proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23,” she added.
The announcement comes amidst heavy debates about the use of private crypto-currency in India and the pending ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ that wasn’t discussed in the first session of the Union Budget 2022-23.
Last year, the Ministry of Finance received a proposal from the Reserve Bank of India for an amendment to the RBI Act, 1934 to include currency in digital form.
The Indian finance ministry is working with the RBI to introduce a phased implementation of the CBDC, said Pankaj Chaudhary, Minister of State in the Ministry of Finance.
“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," said Chaudhary.
Earlier at a virtual summit hosted by US President Joe Biden in December, India’s Prime Minister Narendra Modi also urged cryptocurrency firms to empower democracy.
“We must ... jointly shape global norms for emerging technologies like social media and cryptocurrencies so that they are used to empower democracy, not to undermine it,” the Prime Minister said.
Since 2013, the RBI has strongly opposed the use of crypto in India due to serious concerns from the macroeconomic and financial stability point of view.
With the introduction of its own digital currency, India will join the Eastern Caribbean region (Dcash), the Bahamas (Sand Dollar) and Nigeria (e-Naira) in having their centralised versions of digital cash.
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