Budget 2022: India will join a small group of countries with digital currency
On Tuesday, in her budget speech, the finance minister announced that India will launch a digital currency in 2022-23.
“It is therefore proposed to introduce digital rupee, using blockchain and other technologies, which will be issued by the Reserve Bank of India from 2022-23,” said FM Nirmala Sitharaman, pointing out that a currency digital would give a boost to the digital economy.
India will be among a small group of countries with a digital currency. Data from the Atlantic Council shows that through January 2022, only nine of the 91 countries that had considered a plan to launch digital currency had done so. In addition, 41 were in the research phase and 14 had piloted the project.
In October last year, Nigeria became the ninth country to launch a central bank digital currency called e-Naira. The central bank governor had announced that 500 million eNaira ($1.21 million) had been minted and was available to people with bank accounts linked to the country’s bank identity network.
The UAE, which is still in its pilot phase, plans to develop two products, a central bank digital currency and a multi-central bank digital currency bridge with China, Hong Kong and Thailand to facilitate transactions.
An inter-ministerial committee formed in November 2017 by the Ministry of Finance had recommended the adoption of CBDC in India.
While the Reserve Bank of India’s research arm, IDRBT, discussed the development of a central bank digital currency in 2018, it was not until March 2021 that the RBI hinted at the launch of a digital currency. CBDC. In July 2021, Deputy Governor T Rabi Shankar in a webinar discussed the pros and cons of digital currency. The RBI Governor had said that the central bank is expected to launch pilot projects by the end of December.
The development of CBDCs has accelerated in recent months. Seventy-four countries were exploring a CBDC up to April last year; now 90 countries are exploring a CBDC. As of May 2020, only 35 countries are planning to develop a CBDC.
The number of projects with cross-border payment tests has also increased. In addition to the United Arab Emirates, China, Hong Kong and Thailand, the Dunbar project with South Africa, Singapore, Malaysia and Australia had tested cross-border payments.
The Minister of Finance had also announced a tax on virtual assets in the Budget. The number of digital currency users doubled in the first half of the year, rising from 100 million to over 200 million between January and June 2021.