Finance Minister, SmtNirmala Sitharaman, has announced the introduction of Digital Rupee to be issued by the Reserve Bank of India starting 2022-23 while presenting the Union Budget 2022-23 in the Parliament. The Reserve Bank of India will launch the CBDC from the upcoming financial year that will be backed by blockchain technology.
Key Highlights
- RBI to introduce Digital Rupee using Blockchain and other technologies.
- A digital version of fiat currency is, by definition, an online token and has no physical presence. In that, it is a perfect replacement of cash for an economy.
- The 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.
- The Digital Currency will use block chain and other technologies.
- 75 Digital Banking Units To Be Setup In 75 Districts By Scheduled Commercial Banks
- The Reserve Bank had, in July 2021, indicated that it would soon begin work on the ‘phased implementation’ of the CBDC.
- CBDC or Central Bank Digital Currency is a legal tender issued by the Reserve Bank of India. A CBDC is an electronic record or digital token of a country’s official currency, which fulfils the basic functions as a medium of exchange, unit of account, store of value, and standard of deferred payment.
- CBDC is the same as currency issued by a central bank but takes a different form than paper (or polymer).
- CBDCs should be exchangeable at par with cash.
- CBDC will eliminate the need for interbank settlement.
- Users of Digital Rupee will be able to transfer purchasing power from their deposit accounts into their smartphone wallets in the form of online tokens, which will be a direct liability of the Reserve Bank of India — just like cash.
- “A CBDC, which is a liability of the RBI, will mitigate the risk of losses that Indian depositors face when dealing with commercial banks.”
- The Finance Minister assured that the financial support for digital payment ecosystem announced in the previous Budget will continue in 2022-23. This will encourage further adoption of digital payments. There will also be a focus to promote use of payment platforms that are economical and user friendly.
- The announcement regarding Digital Rupee in the Budget essentially expresses the government’s intention on cryptocurrencies and other virtual currencies.
Source: Union Budget 2022-23
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