Digital rupee to be introduced by the RBI: Budget 2022
The government has proposed to issue a digital rupee managed by the RBI, FM Sitharaman announced in the Union Budget 2022 today.
Introduction of Digital currency by central bank will lead to cheaper currency management. The FM said that the digital rupee issued by RBI will use blockchain technology starting from Fy 2022-23.
The Centre had informed Lok Sabha last year that the Reserve Bank of India (RBI) is working out a phased implementation strategy for introduction of Central Bank Digital Currency (CBDC) by examining use cases, to avoid any disruptions. It further said that the RBI moved a proposal in October seeking to amend the Reserve Bank of India Act, 1934 to enhance the scope of the definition of ‘bank note’ to include currency in digital form.
“The purpose of creating a digital currency is to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs and reduced settlement risk,” MoS Finance informed Lok Sabha in its reply.
The new digital currency would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option, he said. However, be warned that there are also associated risks which need to be carefully evaluated against the potential benefits.
The CBDC is a digital version of fiat currency that can be exchanged via blockchain-based wallets and is regulated by the central bank. Despite the fact that CBDCs were inspired by bitcoin, they are distinct from decentralised virtual currencies and crypto assets, which are not issued by the government and lack the status of “legal tender.”
