RBI digital currency in India
Bitcoin has spread across the world at an immense rate. The cryptocurrency rolled out in 2008. Shortly, it became immensely popular. Now, Almost 100 countries are actively using crypto now. But still, there are many countries that are skeptical about its use.
There are also a few countries that have launched their own digital coins. India is also going to be a part of this race. RBI, India’s central bank will soon release its Digital coin called Digital Rupee.
The government of India announced the launch of RBI digital currency in India in Budget 2022.
Crypto is a decentralized asset. They bypass bigger established authorities. Crypto coins can even trick national banks and the government itself. They can be exchanged for Illegal purposes.
Hence, the Indian government wants to introduce RBI’s digital rupee to counter this. This desi crypto will be legal and safe for transactions.
Basically, the key point is that RBI will regulate it. Hence, it cannot bypass the financial authorities and the government.
One of the key points of the Budget 2022 speech was the introduction of RBI digital currency. Digital Rupee was introduced in this budget.
Hon’ble Finance minister said that the digital rupee will be launched in the financial year 2022-23. It is the central bank’s digital currency. RBI, the highest financial institute in the country will issue it.
The aim of launching the Digital rupee is to strengthen the cashless economy of India. It will serve as the legal base for the growing crypto market in India.
Central Bank Digital Currency
Central Bank Digital Currency (CBDC) is a legal tender issued by the highest financial authority of India, RBI. It is a digital token or electronic record of an official currency of a nation.
CBDC stands on all the parameters of an official currency. It serves as a medium of exchange, monetary unit, store of value, and standard of delayed payment.
As per the RBI website, CBDC will be the electronic form of our paper currency. It will be similar to the paper currency issued by the central bank. But CBDC will issue it as a digital currency. You will be able to use it for daily transactions like buying groceries or eating out.
CBDC is a national currency in digital form. It will appear on a central bank’s balance sheet as a liability (currency in circulation). It will also be exchangeable for cash.
RBI digital currency launch date
Our honorable Finance minister stated that RBI digital rupee will be launched in the financial year 2022-23. However, an annual report released by RBI on May, 27 stated that the institute will take a graded approach in launching the RBI digital currency.
It also said that the design of the CBDC needs to match the financial stability, monetary policy, and efficient currency operation and payment systems.
This statement on RBI digital currency launch date came months after RBI announced that it is ready to begin testing pilot projects on the CBDC.
RBI digital currency pros and cons
Every new currency comes with its own perks and losses. Paper currency is directly linked to gold. In India, RBI creates money in accordance with the Minimum Reserve System. This system ensures an appropriate supply of money in the economy.
As per the Minimum Reserve system, the RBI is to hold a minimum reserve of Rs 200 crore in form of gold coins, gold bars, and foreign currencies. But crypto is not bound to such rules and regulations. This is why Government aimed at creating more balanced digital coins which do not cause inflation in the economy.
Some of the RBI digital currency pros and cons are:
- RBI digital currency will aid in increasing the popularity of digital coins. It will increase the acceptance of digital transactions in society.
- The digital rupee will also be a more faster and secure method of online payment. It will increase your access to more online services.
- You will be able to swipe your digital rupee with paper currency. Hence, it will keep the value of money intact.
- Unlike Bitcoin and other crypto coins, RBI Digital currency will be regulated. It will have a fixed monetary value like the paper currency of our country. It is the simple electronic form of paper currency.
- The major downside of a regulated currency is that it handles the government more control on your money than you. It hurts the poor section of society and gives privilege to the rich.
The cashless economy in India
Government is now more focused to cater the demand for digital payment methods. But at the same time, it wants to introduce a regulated digital coin to ensure effective regulation of the digital economy.
CBDC payments will reduce the risk of settlement risk in the financial system. It can be compared to the current UPI system we have. Cash transactions will take place digitally. But unlike UPI, CBDC has focused on effective global payments also.
The Indian importer will pay its American exporter in digital Dollars in real-time. It will eliminate the need for an intermediary. This transaction would be final as if a transaction of dollars in cash took place.
You would not even require the US Federal Reserve system for settlement. Currency settlements will become unaffected by time zone differences.
The ultimate aim is to create a cashless economy and provide a seamless exchange service. We can expect to see this digital shift in the economy soon.
FAQs – RBI digital currency
Is RBI going to launch digital currency?
RBI is soon planning to launch its own digital currency, Digital Rupee. RBI digital currency will launch in this financial year only. However, a recent notice by RBI may indicate a delay in plans.
The notice stated that the digital currency needs to compile with the financial stability, monetary policy, and efficient currency operation and payment systems of the country. Only then they can execute pilot projects.
Is cryptocurrency legal by RBI?
Cryptocurrency is still not legal in India. However, the introduction of a tax on cryptocurrency in India has also moved it out of the illegal zone. Consequently, it is in a gray area now.
In budget 2022 Government announced imposing of 30% crypto tax in India. From this financial year, you have to pay a 30% tax charge on your crypto profit. . To know more about it Click here.
You can also learn about What is a cryptocurrency & How does it work?