India Wants to Launch its Own Digital Currency

The Indian Central Bank has stated that a digital national currency will be issued in 2022-2023. According to experts, there are between 15 and 20 million crypto investors in India with a total volume of crypto assets of about 400 billion rupees ($5.37 billion). There is no official data on the size of the Indian crypto market.

Why Does India Require a Digital Currency?

The Reserve Bank of India had previously opposed the use of cryptocurrencies, claiming that they represented a danger to the country’s financial independence and were an inefficient and unreliable tool for financial transactions.

Simultaneously, the Indian government is drafting legislation that would create an official digital currency and prohibit the usage of other cryptocurrencies in the country. It also includes only trading digital assets on exchanges with the consent of the government, as well as the imposition of sanctions for the illegal sale or storage of cryptocurrencies.

During the presentation of the country’s annual budget, Indian Finance Minister Nirmala Sitharaman stated that the central bank’s adoption of a digital currency will give the digital economy a major boost.

According to Nirmala Sitharaman, digital currency would lead to a more efficient and cost-effective currency management system.

Despite the unveiling of the e-rupi, the finance minister did not disclose any information on how the digital rupee would function or look.

Technologies Used

The introduction of the digital rupee would be produced “using blockchain and other technologies,” according to the Indian Ministry of Finance. It’s also worth noting that India might be one of the first big economies to use a digital bank digital currency (CBDC), but only if all goes according to plan.

Sitaraman did not elaborate on how the digital rupee will function or appear, only that it would be deployed “using blockchain and other technologies.”

The term “blockchain” refers to a technology that was first developed in conjunction with Bitcoin, but its definition has grown as its use has moved beyond cryptocurrencies.

If India continues to its intentions, it will be one of the world’s largest economies to implement a so-called central bank digital currency (CBDC).

China Experience

Remember that the Chinese Central Bank was one of the first to begin developing a national digital currency. China’s five-year economic and social development plan includes the digital yuan scheme.

The People’s Bank of China has been conducting trials in the form of lotteries for the past two years, in which individuals in specific cities were given digital yuan to spend. The central bank has recently been attempting to extend the use of the digital yuan. China has yet to roll out its digital money across the country, and there is no timetable for when it will do so.

Japan is also considering establishing its own CBDC, and the US Federal Reserve published a study on the digital currency last month but has yet to commit to issuing one.

The Spanish Socialist Workers’ Party (PSOE) had filed a proposal to Congress to develop a national digital currency earlier in June. This, according to the developers of the concept, is important in light of “the gradual extinction of currency.”

The South Korean Central Bank revealed at the end of May that it was aiming to create its own cryptocurrency and that it was running an auction to choose a technology provider. Commercial banks and retail businesses will be part of the experimental platform.

While India is promoting the concept of a digital rupee, it is also attempting to take a harsher position on cryptocurrencies such as Bitcoin, which it is now attempting to regulate.

According to the research firm Chainanalysis, India ranks second in the world in terms of bitcoin users, trailing only Vietnam in this category. The cryptocurrency market in India expanded by 641 percent from July 2020 to June 2021. During this time, the country’s investment in digital assets climbed from $923 million to nearly $6.6 billion.

Sitharaman stated recently that income from the transfer of virtual digital assets should be taxed at a 30% rate.

Cryptocurrency regulation: international experience

At the same time, central banks around the world have accelerated the development of their own digital currencies; now, 80 central banks are working on digital currency projects (CBDC).

CBDCs, unlike cryptocurrencies, have all of the functions inherent in fiat money: central banks believe that the release of CBDCs will help them cope with the rapidly growing crypto market, because transactions in central bank digital money, which are more secure, will crowd out some of the current cryptocurrency transactions.