2/4/22, 2:43 PM Indian central bank to issue digital rupee

Indian central bank to issue digital rupee

Tuesday, 1 February 2022

The Reserve Bank of India (RBI) will issue a new digital

rupee powered by blockchain technology starting fiscal
2022-23, Finance Minister Nirmala Sitharaman said during
the Union Budget 2022 on Tuesday.

Blockchain technology also powers cryptocurrency, non-

fungible tokens (NFTs) and it is a distributed ledger,
updated in real-time. In a blockchain, the transaction
records cannot be changed at all and the ledger is
transparent and authentic, which is why it is used in
cryptocurrency as well.

Meanwhile, the government has also announced that any income from transfer of digital assets will be
taxed at 30 per cent rate, reports bdnews24.com citing The Indian Express.

This will impact gains from cryptocurrency and NFTs as well, which have seen a boom in India in
recent times. “No deduction in respect of any expenditure or allowance shall be allowed while
computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset
cannot be set off against any other income,” Sitharaman said.

In order to capture the transaction details, the government has also provided for TDS on payment made
in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a
monetary threshold. Gifting of virtual digital asset is also proposed to be taxed in the hands of the
recipient.

“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 technology to be issued by the
Reserve Bank of India starting, 2022 and 2023,” Sitharaman said in parliament.

The central bank digital currency (CBDC) is a digital form of fiat currency which can be transacted
using wallets backed by blockchain and is regulated by the central bank. CBDC is different from
decentralised virtual currencies and crypto assets, which are not issued by the state and lack the ‘legal
tender’ status. It enables the user to conduct both domestic and cross border transactions which do not
require a third party or a bank.

The move comes amid the government’s plans to introduce a bill on cryptocurrencies that seeks to
prohibit “all private cryptocurrencies in India” with “certain exceptions”.
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2/4/22, 2:43 PM Indian central bank to issue digital rupee

India will not be the only country to launch a digital currency. In October 2021, Nigeria launched
eNaira, which is a non-interest-yielding CBDC. Bahamas and five other islands in the East Caribbean
have also introduced CBDCs.

Editor : Shah Husain Imam

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