Explained: The Digital Rupee that was announced during the Union budget 2022-23
Nirmala Sitharaman, the Union Minister of Finance and Corporate Affairs of India announced the union budget 2022-23 on 1st February 2022. As part of the union budget, Ms. Sitharaman put forth the upcoming launch of Digital Rupee, also known as the Central Bank Digital Currency (CBDC) that will be available from next year onwards. The aim behind this launch is to boost India’s digital economy and further currency management system. Here’s what is known so far about this cutting-edge technological and economic resource.
What is a Digital Rupee?
Digital Rupee is a legal tender issued by a centralised bank in a digital form. A legal tender is any form of currency that by law cannot be refused as payment to extinguish a debt equal to the amount offered. In simple terms, it is a digitised version of a fiat currency (money that has indirect market value issued by the government) that can easily be exchanged during transactions, at par like cash. Digital Rupee will act as an electronically issued sovereign currency that will appear as a currency in circulation (liability) in a central bank’s balance sheets.
Who will launch the Digital Rupee?
The Digital Rupee will be launched by the Reserve Bank of India (RBI) in the next financial year. It is part of the Government of India’s initiative to launch a centrally available and functioning digital currency that will operate based on blockchain technology.
Why is the Digital Rupee necessary?
As per the Government of India, the Digital Rupee will provide the citizens of India with an alternative to traditional banking system. It will not only be convenient and secured because of its digital status, but also ensure well-regulated and reserve-backed circulation. The announcement of Digital Rupee launch also indicates that the Indian government intends to put more emphasis on the use of virtual currencies.
The primary goal behind the anticipated launch of Digital Rupee is to ensure the prevention of monetary malpractices, such as, money laundering, tax evasion and terror financing. Moreover, a centralised digital currency will also ensure that private cryptocurrencies like Bitcoins and Ethereum are not misused.
How will things change for the citizens?
It is still not clear as to how the Digital Rupee will be transacted. However, the key difference will be that a transaction with Digital Rupee will be instantly processed in contrast to present digital payment system that often takes time, depending on the stability of the internet servers.