RBI to issue Digital Rupee in FY23

The government on Tuesday announced that the Reserve Bank of India (RBI) will issue the much awaited digital rupee in the next financial year. Making the announcement in her Budget speech, finance minister Nirmala Sitharaman said that the digital rupee or the Central Bank Digital

Currency (CBDC) will be based on blockchain technology, the tech behind Bitcoin and other popular cryptocurrencies.

“Introduction of Central Bank Digital Currency (CBDC) will give a big boost to the digital economy. 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.”

A CBDC is the legal tender issued by a Central bank in a digital form.

It is the same as a fiat currency and is exchangeable one-to-one with the

fiat currency. Only its form is different. However, it is not comparable to the private virtual currencies such as Bitcoin or Ethereum that have mushroomed over the last decade. With this, India joins the likes of China, Russia and the UK among major economies evaluating the issuance of their own digital currency.

“The announcement on the launch of a Digital Rupee using blockchain issued by the RBI will familiarise Indians with the benefits and efficiency of virtual currency, building an appetite for the crypto, blockchain and the multitudes of innovations and employment opportunities that these technologies are capable of fostering,” said Avinash Shekhar, CEO, ZebPay. According to a study by the Bank of International Settlements (BIS), 86 per cent of Central banks in the world are researching CBDC while 60 per cent are experimenting with it. As much as 14 per cent of Central banks are in the pilot testing phase.

RBI deputy governor T. Rabi Sankar had said in July 2021 that the RBI is working toward a “phased implementation strategy” of a CBDC and would be conducting pilot tests in wholesale and retail segments. Mr Sankar also said that the Central bank is working on the scope and legal framework of the proposed CBDC that will likely coexist with cash and digital forms of payments.