Budget 2022: Digital rupee to be introduced as Central Bank Digital Currency in 2022-23

The Reserve Bank of India (RBI) will introduce the Central Bank Digital Currency (CBDC) as India’s official digital rupee in 2022-23, finance minister Nirmala Sitharaman announced at the Union Budget 2022. The announcement comes after months of speculations around the introduction of a blockchain-based official digital currency of India.

“The introduction of the CBDC will give a big boost to India’s digital economy. The digital currency will also lead to a more efficient and cheaper currency management system,” Sitharaman said. Exact details about the CBDC, its regulations and launch timeline are yet to be announced.

The CBDC is expected to be India’s official digital currency issued by the RBI, which was initially proposed as part of India’s regulatory reforms on cryptocurrency. The currency is expected to be tethered to the fiat version of the Indian rupee, and will use blockchain and related technologies to operate.

A report by the Bank for International Settlements states that central virtual currencies, such as RBI’s CBDC in India, can help central governments undertake cheaper and more efficient currency management steps.

Sitharaman also announced income tax to be levied against capital gains made in the field of “virtual digital assets”, which will include ‘private’ cryptocurrencies such as Bitcoin, Ether and the likes, as well as a growing market of non-fungible tokens (NFTs). Such gains will be taxed at 30 percent, and no deductions can be claimed against investments made in digital assets such as cryptocurrencies.

The finance minister also stated that a TDS (tax deducted at source) of 1 percent will be levied against investments in virtual assets above a “certain threshold”. Exact details regarding this threshold are yet to be revealed.

Going forward, the Indian government is expected to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill in the coming months. The latter is expected to regulate the role of investment, transaction and use of private cryptocurrencies in the country, including how the upcoming CBDC will work.