Union Budget 2022: Digital currency by RBI to be launched in 2022-2023, announces Nirmala Sitharaman

The Reserve Bank of India will issue a digital currency using blockchain and other technology starting from FY 2022-23, Finance Minister Nirmala Sitharaman announced in her Budget speech today. Introduction of digital currency by the central bank will lead to efficient and cheaper currency management, as proposed in the Budget 2022.

“Digital rupee to be issued by Reserve Bank of India using blockchain and other technologies starting FY 2022-23. This will give a big boost to the economy and lead to cheaper and efficient currency management,” said Sitharaman.

The RBI has been working on a plan to introduce the Central Bank Digital Currency (CBDC) since the past few months. Now, this comes as a formal announcement from the government regarding a digital currency though the RBI is yet to test the new digital asset and disclose its plans about the technology framework.

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In October 2021, an amendment to the Reserve Bank of India Act, 1934 was proposed to widen the scope of the definition of ‘bank note’ to include digital currency. Earlier, the government had informed Lok Sabha that the RBI is working out an implementation plan for the introduction of Central Bank Digital Currency.

In his reply to Lok Sabha in November 2021, MoS Finance Pankaj Chaudhary said that the creation of digital currency would lead to a more robust, efficient and regulated legal tender based payments option. It would also reduce dependency on cash.

RBI Deputy Governor, T Rabi Sankar, in July 2021, discussed in detail about the reason for the introduction of a digital rupee and the possible risks linked to it.

The digital currency will not be a replacement of the fiat currency but it would be a digital version which can be transacted through blockchain-based exchanges regulated by the RBI. The RBI may delegate some operations regarding digital rupee to banks and the depositors may get an option to convert their bank deposits in cash to digital rupee.

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