India’s central bank to launch a digital currency in the next financial year

Central bank digital currency

After announcing a 30% tax on any income from the transfer of virtual digital assets, India’s finance minister also confirmed that India’s central bank will introduce a digital currency in the next financial year. This digital currency will be using blockchain and other supporting technology. For now, this digital currency is known as central bank digital currency (CBDC).

“Introduction of a central bank digital currency will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” Nirmala Sitharaman said on Tuesday while presenting the federal budget.

RBI moved a proposal back in October to amend the Reserve Bank of India Act, 1934 for changing the definition of ‘bank note’ to include currency in digital form. RBI has already been testing cryptocurrency for several months to understand its impact on the Indian economy and banking system.

Central bank digital currency (CBDC) will be a legal tender in a digital form and can be used in the same way we use fiat currency. The government is not ready to approve available cryptocurrencies as a legal tender for purchases. So, the government is making its own cryptocurrency for people to provide a trusted, regulated, and legal tender-based payments option.

Even if the upcoming CBDC is inspired by Bitcoin, it will be different from decentralized virtual currencies. We still don’t know much about the CBDC and can’t say if the digital Rupee will also be traded just like any other cryptocurrency.

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