With the government announcing its own digital currency by 2023, industry experts on Wednesday welcomed the move, albeit with caution as there is no formal Crypto Bill in place that clears the air around its use, and the Reserve Bank of India (RBI) is yet to take concrete steps on the long-haul journey.
Finance Minister Nirmala Sitharaman introduced the Central Bank Digital Currency (CBDC) in her Union Budget 2022-23 speech, saying that it will give a big boost to the digital economy.
"I said that the reserve bank (RBI) will be issuing a digital currency... a currency is a currency only when it is issued by a central bank, even if it's a crypto. So, let's understand that we are not taxing currencies which are yet to be regularised," Sitharaman said later during the press briefing on Tuesday, while clarifying the government's stance on crypto currency.
According to former Union Finance Secretary Subhash Chandra Garg, a key figure behind drafting the original Crypto Bill, the digital rupee announcement is just a formal one as of now.
"The RBI has not prepared its model or tested it. The government has also not indicated when it will bring out enabling laws for it. It is a long journey to take," Garg told IANS.
The Central Bank has already been deliberating upon various aspects relating to the central bank digital currency and private crypto currencies. It has been working on modalities for central bank digital currency.
CBDCs are presently mostly in the hypothetical stage, with some in proof-of-concept programmes.
However, more than 80 per cent of central banks are now looking at digital currencies.
According to Aniket Jindal, Co-founder of developer platform Biconomy, Such a Blockchain-based digital rupee has the potential for being a big step in onboarding hundreds of millions of Indians into the Blockchain economy.
"It will also help open one of the largest economies to new innovations in the Web 3.0 ecosystem," he said.
China's digital RMB was the first digital currency to be issued by a major economy. On September 27, 2021, Tajikistan announced the creation of a CBDC with the Fantom Foundation, and Nigeria was the first African country to launch its CBDC on October 25.
The Bank of America said in its recent report that a US CBDC would differ from the digital money currently available to the public because it would be a liability of the US Federal Reserve, not a commercial bank, and so would have no credit or liquidity risk.
The US Fed has also published a discussion paper on the benefits and risks of a CBDC.
According to Aishwarya Shivakumar, CEO of Oddz Finance, a decentralised finance crypto derivatives trading platform, with the announcement of RBI launching its own digital currency using Blockchain in 2023, the awareness of the technology and the economics surrounding it is only bound to increase.
"This announcement also implies a positive outlook of the government towards this technology and its potential," Shivakumar said.