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NEW DELHI: The Indian government has proposed to issue a digital rupee managed by the Reserve Bank of India (RBI), Foreign Minister Nirmala Sitharaman announced while presenting the budget.
The foreign minister said the introduction of digital currency by central bank will lead to cheaper currency management. She said that the digital rupee will use blockchain technology from 2023.
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,” Minister of State Finance Pankaj Chaudhry 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.”
According to experts, the new digital currency may lead to a more stable, efficient, reliable, regulated, and legal tender-based payment option. However, there are risks involved which must be carefully considered in light of the potential advantages.
India’s finance minister also announced the country will auction 5G airwaves this year to facilitate a roll out of the next-generation telecoms service in 2022-23. New Delhi will also launch a scheme for design-led manufacturing to boost 5G in the country, Nirmala Sitharaman said.
