New Delhi: Finance Minister Nirmala Sitharaman in her Union Budget speech said that the Reserve Bank of India (RBI)-led digital rupee using blockchain will be launched in FY23.
The digital rupee or central bank digital currency will be introduced using the blockchain technology, the minister said on Tuesday.
The RBI earlier in October last year received approval for an amendment to the Reserve Bank Of India Act, 1934 to enhance the scope of the definition of bank note to include currency in digital format.
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A central bank digital currency (CBDC) is a sovereign currency in an electronic form and would appear as liability (currency in circulation) on a central bank’s balance sheet. A 2021 survey by the Bank for International Settlements (BIS) found that 86 per cent of central banks were actively researching the potential for CBDCs, 60 per cent were experimenting with the technology and 14 per cent were deploying pilot projects.
The budget decision got a thumbs up from the industry.
"India will now join a handful of nations to launch its own blockchain currency. This has huge implications for finance overall and underscores India’s pre-eminence in digitised finance. Not even the United States has launched their CBC yet. Immediately, the CBC means leveraging the benefits of blockchain, lower opex, and faster settlements. We need to await full details to understand all implications," said Adhil Shetty, CEO, BankBazaar.com.
Earlier, the central board of the Reserve Bank of India (RBI) on Friday discussed various issues related to the central bank digital currency (CBDC) and private cryptocurrencies, the RBI said in a statement.
The 592nd meeting of the central board of directors, held in Lucknow, was chaired by Governor Shaktikanta Das.
The RBI has been working towards a phased implementation strategy for a central bank digital currency (CBDC), however, it has on several occasions, expressed reservations with private crypto currencies.
The RBI had introduced the proposal of Central Bank Digital Currency (CBDC) in October seeking to amend the Reserve Bank of India Act, 1934.
The term CBDC refers to the virtual form of a fiat currency. A CBDC is an electronic record or digital token of a country’s official currency, for example, rupee in India.
On the very first of the winter session in Parliament, the Ministry of Finance in a written reply said, “Introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk.”