Nirmala Sitharaman, the Finance Minister, was speaking at the India Global Forum 2022
The FM lauded the industry's move to welcome taxes on private cryptos
Sitharaman also said there was a possibility for revenue in VDAs
The government of India is expecting its central bank digital currency (CBDC) to be rolled out this year, Finance Minister Nirmala Sitharaman said.
While speaking at the India Global Forum 2022 in Bengaluru, Sitharaman said, “It was a conscious call taken in consultation with the central bank – the Reserve Bank of India. We would like them to design it the way they would like to do it, but this year we expect the currency to come out from the central bank itself.”
Further answering a question on the regulation of private cryptos and other virtual digital assets (VDAs), the Finance Minister said that the government is holding consultations with the stakeholders, and has invited the industry to contribute to the same.
“After the consultations are over, the ministry will take necessary steps,” she said. The FM also lauded the industry’s move to welcome taxes on private cryptos.
“Currently, we are neither regulating it nor banning it but after consultation, we will be talking about it,” Sitharaman clarified.
However, Sitharaman did say that the government does see value in cryptocurrency. “Many Indians have seen a lot of future in crypto and therefore, I see a possibility for revenue in it,” she said.
The Finance Minister also said that the government sees ‘clear advantages’ in a CBDC.
She said, “In this day and age, bulk payments happening between countries, large transactions between institutions and large transactions between central banks themselves of each country are all better enabled with digital currency.”
The FM added that RBI would design the CBDC on its own. While explaining the keynote of the Budget, Prime Minister Narendra Modi had said that CBDC will boost the digital economy and will be as good as the fiat currency of the nation.
The Digital Rupee: India’s Own CBDC
On February 1, 2022, while announcing the Union Budget 2022, India’s Finance Minister Nirmala Sitharaman announced the CBDC project.
CBDCs or Central Bank Digital Currencies are digital tokens, similar to cryptocurrency, issued by a central bank. They are pegged to the value of that country’s fiat currency.
Therefore, one digital rupee would be equal to one INR and will be subject to the same market fluctuations as the INR faces.
At the time of the announcement of the CBDC, it had received an overwhelming response from hundreds of founders and investors.
These included the likes of Paytm’s Vijay Shekhar Sharma, CRED’s Kunal Bahl, Binance founder and CEO Changpeng Zhao and Sriram Krishnan, who appreciated the government’s move to launch the digital currency and move a step further towards regulating crypto.
India joins a growing group of nations to explore launching CBDCs. Just one day before India’s announcement, the central bank of Jamaica had said that it would roll out a national digital token in the first quarter of 2022.
Other Eastern Caribbean nations including Grenada, Saint Lucia, Antigua, and others launched a digital currency in 2021 called DCash.
Japan, China, and the United States have also explored the possibility of launching CBDCs.
In all, the seven countries have launched their CBDCs, while 78 others either have plans to do so or are exploring their options.
Central bank digital currencies are designed to be similar to cryptocurrencies, but they may not require blockchain technology or consensus mechanisms.
What’s more, cryptocurrencies tend to be unregulated and decentralised. Their value is also not stable and is dictated by investor sentiments, usage, and user interest. Hence, they are volatile assets more suited for speculation than any financial system that needs stability.
The rise of CBDCs on a global scale calls into question the importance of decentralisation and regulation to the broader success of cryptocurrencies.