Presenting the Union Budget 2022-23, Finance Minister Nirmala Sitharaman said that the Reserve Bank of India (RBI) would introduce the digital rupee in 2022. “RBI to issue digital rupee using blockchain technology In FY22-23,” the finance minister said in the parliament. Sitharaman noted, “Digital currency will also lead to a more efficient and cheaper currency management system. Therefore, it is proposed to introduce a digital rupee using blockchain and other technology to be issued by the Reserve Bank of India starting in 2022 and 2023.
The digital rupee will have the same value as the physical rupee.
Like all other fiat currencies, the CBDC will be backed by central reserves. The digital version of the rupee is essentially going to be the digital representation of a rupee backed by the Reserve Bank of India (RBI). India is not the only country that is experimenting with digital legal tender. The digital dollar, e-yuan, and digital euro are some of the projects that various central banks are experimenting with right now. Moreover, unlike Bitcoin, which is a cryptocurrency built on the underlying blockchain technology allowing users to remain anonymous, the official digital currency will have the backing of the RBI.
The digital rupee would be a centralized digital currency.
The most concerning thing regarding CBDCs in the crypto community has been privacy. Cryptocurrencies like bitcoin are decentralized and are not controlled by one organization. However, CBDCs will be under government oversight, making them completely centralized. India’s CBDC will have the same value as the physical rupee. Physical cash is much harder to trace than digital transactions. It’ll be interesting to see how the Indian government will deal with the privacy issue of digital transactions.