A top government source said that India shall very soon have its very own official digital currency. By 2023, this digital currency shall mirror any of the currently available private company-operated electronic wallets, but with a change that it will be a sovereign-backed facility.
The launch of a central bank-backed ‘digital rupee’ was mentioned by the Finance Minister Nirmala Sitharaman in her budget speech.
The source said that the units issued in digital rupee would be included in the currency in circulation and shall not be very different from fiat currency. In a sense it would be a government-mandated electronic wallet as it would be more like an electronic form of fiat currency.
A source said that the according to the indication of RBI, digital rupee would be ready by the end of next financial year.
Ability To Track All Transactions
Unlike the current system of mobile wallet offered by private companies, the Reserve Bank developed digital rupee blockchain would be able to trace all transactions.
The source said that people, while using the electronic wallet offered by private companies, transfer money to the private company who holds the money on his/her behalf and pays to a merchant when there is any transaction.
Once the money is transferred to the e-wallet of a private company, not only the charges are levied by such companies, but also the credit risk of that company is also attached to the money.
In the 2022-23 Budget speech, FM Nirmala Sitharaman had said that introduction of 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. It is, therefore, proposed to introduce Digital Rupee, using blockchain and other technologies, to be issued by the Reserve Bank of India starting 2022-23,” the minister had said.
Regulations Yet To Be Finalized
The exact regulation governing this Central Bank Digital Currency (CBDC) is yet to be finalised.
CBDC is a digital or virtual currency but it is not comparable to the private virtual currencies or cryptocurrency that have mushroomed over the last decade. Private virtual currencies do not represent any person’s debt or liabilities as there is no issuer.
The government has already said that private cryptocurrencies will never be a legal tender. The RBI has been strongly opposing private cryptocurrencies as they could have implications on national security and financial stability.
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