Think of this situation – It is eight in the evening and there is an announcement made that from here on, all rupee notes are being withdrawn and replaced with a digital currency called CBDR or a Central Bank Digital Rupee. People needn’t fret out and have a week’s time to visit any branch of the Reserve Bank of India (RBI) or any public sector bank and exchange all their currency for digital rupees. They wouldn’t be interrogated.
An account would be opened with the RBI, and based on one’s official Aadhaar card and PAN card details, the amount would be automatically transferred to it for access through a registered mobile phone. The transaction would take just a few minutes and one can step out of the branch with money loaded on one’s handset. Does this sound whimsical? It might sound so, but at the same time, might turn into reality too.
Presenting the Union Budget 2022-23 Finance Minister Nirmala Sitharaman said that India’s RBI would be launching a digital currency, which will be a digital rupee in 2022-23. She said,
“RBI to issue digital rupee using blockchain technology in FY22-23.”
She also emphasized the fact that this would give a big boost to the economy.
Further elaborating on the purpose of introduction, the minister of state from the finance ministry said,
“Introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transactions costs, reduced settlement risk. Introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option. There are also associated risks which need to be carefully evaluated against the potential benefits.”
India isn’t the only country attempting to implement a digital legal tender system. Central banks all across the world are testing out these waters, with China’s digital yuan leading the race for now.
However, the highly anticipate Cryptocurrency and Regulation of Official Digital Currency Bill did not find a place yet again in the tentative list of 15 proposed legislations. Opining on the same, Ritesh Kumar, Partner, IndusLaw said,
“Non introduction of crypto-currency bill in the current session is on expected lines given that the Government has not taken a final call on the legal sanity of crypto-currency.”
Nonetheless, Nirmala Sitharaman announced a 30% tax on any income from the transfer of virtual digital assets, specifying that no deductions and exemptions would be allowed.
The gifts are to be taxed on the hands of the recipient, she said, adding that there’d also be a 1% tax deducted at source (TDS) on the payments made for the transfer of digital assets. It was also announced that any loss made on the transaction of such digital assets cannot be set off against any other gain.
“Any income from virtual digital assets is taxable at 30%… There will be no deduction with exception of the cost of acquisition. The TDS is applicable beyond a specified monetary threshold, and the gift of virtual currencies is taxable in the hands of the recipient.”
While the Indian community rejoiced with the current development, some of the key crypto proponents in the subcontinent raised their doubts and hinted that it may not pan out over time. Naimish Sanghvi, founder of CoinCrunch India, stated,
However, it should be noted that the Indian government has been keen about the CBDC prospects for quite some time now. For instance, earlier in August this year, RBI governor Shaktikanta Das had asserted that the trials for the introduction of the official digital currency would likely begin in December. Back then he had stated,
“I think by the end of the year, we should be able to – we would be in a position, perhaps – to start our first trials.”