RBI to introduce digital currency in FY23: Minister

NEW DELHI: The Reserve Bank of India (RBI) will introduce digital currency in the next financial year beginning April 2022 to boost the digital economy and efficient currency management, Finance Minister Nirmala Sitharaman proposed in her Budget speech on Tuesday.

The introduction of a central bank digital currency will give a big boost to the digital economy. Digital currency will also help in the currency management system, the minister said.

“Digital currency will also lead to a more efficient and cheaper currency management system. It is therefore proposed to introduce digital rupee using blockchain and other technologies to be issued by the Reserve Bank of India, starting 2022-23,” Sitharaman said.

She also said ₹1 lakh crore financial assistance to states will be provided in 2022-23 to catalyse investments.

The finance minister further said that in 2022-23, states will be allowed a fiscal deficit of up to 4% of GSDP (Gross State Domestic Product).

The minister also proposed to set up an expert committee to examine and suggest appropriate measures to scale up venture capital and private equity investment. Venture capital and private equity invested more than

Rs 5.5 lakh crore last year, facilitating one of the largest startup and growth ecosystems. Scaling up this investment requires a holistic examination of regulatory and other frictions, she said.

On blended finance, she said that the government-backed Funds NIIF and SIDBI Fund of Funds had provided scale capital, creating a multiplier effect. For encouraging important sunrise sectors, such as climate action, deep-tech, digital economy, pharma and agri-tech, the government would promote thematic funds for blended finance with the government share being limited to 20% and the funds being managed by private fund managers, she added.

“Creation of a blockchainbased central bank digital currency while bringing virtual digital assets under the tax net at the highest rate of 30% will help reduce speculative play, especially in the cryptocurrency space,” Shravan Shetty, MD, Primus Partners- Digital Currency, said, adding the central currency will help bring the benefit of a digital currency to the economy in a structured framework.

Harry Parikh, Associate Partner - M&A Tax and Regulatory Services, BDO India, said a nonchalant introduction of taxation on digital currency coupled with a withholding tax on every transaction could give rise to a lot of compliance issues for crypto businesses.