Presenting her fourth Budget, Finance Minister Nirmala Sitharama said on Tuesday that the digital currency will be issued by the Reserve Bank of India (RBI) in 2022-23 using blockchain technology. With the help of Central Bank Digital Currency or CBDC, experts say all transactions can be tracked on the ledger with no ability to modify the past – leading to transparency and easy book keeping. It will be a technology-led exchange of the digital rupee with RBI overseeing the supply as well as usage side.
“Introduction of CBDC sends a clear signal of India being a digital-first, efficiency-driven, and transparency-led system. CBDC with the backbone of Blockchain will help us hold a powerful position in the global economy. We welcome the move and congratulate the government for this visionary move,” said Sumit Gupta, Co-founder & CEO, CoinDCX.
It is also expected that one will be able to do micro transactions, thus, taking load off traditional banking networks. Though the details have not been revealed yet, it is expected that CBDC will make cross border money transfer simpler with minimal fees.
Vikram Subburaj, CEO, Giottus Crypto Exchange said, “The issuance of a central bank digital currency (CBDC) by the RBI will enable an efficient transfer of digital rupee much like UPI, IMPS or NEFT. This can make transfers cheaper and enable 24x7 serviceability. Overall, we believe that the ecosystem along with its businesses and investors are primed for growth in the upcoming future. The Government, we believe, has already laid the foundation for a future thriving and sustaining industry.”
Moreover, no country has yet implemented a CBDC-based economy though many are in the testing phase currently. “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 CBDC yet. Immediately, the CBDC 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
Shravan Shetty, Managing Director, Primus Partners - Digital Currency, argues, “The central currency will help bring the benefit of a digital currency to the economy in a structured framework.”
Cryptos under tax ambit
On the news of cryptos under the tax ambit now, CoinDCX's Gupta said, “Taxation of Virtual Digital Assets or Crypto is a step in the right direction. It gives much-needed clarity and confidence to the industry. India's focus on digital innovation and the promotion of blockchain technology is welcome.”
Subburaj agreed and said, “We are delighted by the announcements today. It gives relief to a lot of investors that the Government is recognising the crypto asset ecosystem and has taken efforts to give clarity on its taxation. This legitimizes the crypto asset in the country and paves way for a formal umbrella of regulations going forward. A standardised 30 per cent tax treatment is welcome though we await the details on what is a taxable event and what is the threshold for 1 per cent TDS deduction. We do hope that the Government will give exchanges and other businesses a certain time period to enable the tech behind TDS deduction and bookkeeping. Offsetting and carry forwarding losses have worked well in other countries but we are happy to see a consideration given to all such instances.”