On May 27, Indian central bank, RBI, announced that it is adopting a “Graded Approach” to the launch of Central Bank Digital Currency (CBDC) in accordance with the objectives of monetary policy, financial stability, and efficient operations of currency and payment systems. RBI offers a graded approach to CBDC implementation, progressing through phases of proof of concept, pilots, and launch.
The bank also stated that it is investigating the merits and drawbacks of creating a digital currency in India, as well as the right design components of CBDCs that might be deployed with little or no interruption.
CBDCs are digital or virtual currencies issued by central banks. They are essentially the digital equivalent of fiat currencies, such as India’s local currency, the rupee.
RBI on the impending release of the digital currency
On May 27, the Reserve Bank of India published its annual report for 2021-22. India’s central bank digital currency (CBDC) was among the various subjects covered in the report.
While presenting the Union Budget 2022-23, India’s Finance Minister, Nirmala Sitharaman, disclosed the central bank’s plan to build a digital currency in February.
According to the RBI report, a relevant amendment to the RBI Act of 1934 has been incorporated in the Finance Bill of 2022. The Finance Bill, 2022, has been passed, establishing a legislative foundation for the establishment of CBDC.
Anti-crypto position of the RBI
Meanwhile, the RBI has maintained its anti-crypto position. Governor Shaktikanta Das issued a warning last week about investing in the cryptocurrency sector, leading to the fall of cryptocurrency terra (LUNA) and stablecoin TerraUsd (UST).
In February, the central bank stated that cryptocurrency poses a significant danger to India’s macroeconomic and financial stability. The bank’s deputy governor also claimed that prohibiting cryptocurrencies is the best option for India and that supervision is futile.
The Indian government really hasn’t opted for a crypto policy for the country, although crypto revenue is already taxed at 30%. Furthermore, a 1% tax deducted at source (TDS) will be implemented in India soon.
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