India's digital currency to debut by early 2023
GS Paper - 3 (Economy)
India's very own official digital currency is likely to debut by early 2023, which will mirror any of the currently available private company-operated electronic wallets, but with a change that it will be a sovereign-backed facility. Finance Minister Nirmala Sitharaman in her budget speech talked about launching a central bank-backed 'digital rupee' soon.
- The digital currency issued by the RBI would be numbered in units, just like every fiat currency has a unique number.
- The units issued in digital rupee would be included in the currency in circulation.
- It would not be very different from fiat currency. It would be more like an electronic form of fiat currency, so in a sense it would be a government-mandated electronic wallet.
- The digital rupee blockchain, being developed by the Reserve Bank, would be able to trace all transactions, unlike the current system of mobile wallet offered by private companies.
- Digital currency will also lead to a more efficient and cheaper currency management system.
- 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.