On Tuesday, the Indian finance minister, Nirmala Sitharaman announced that the Reserve Bank of India (RBI) will release its digital currency. She started by introducing the Union Budget 2022 and made it clear why this digital Rupee won’t be like cryptocurrency.
A CBDC will seem like a fiat currency but that won’t be the reality. As per the ministry, it will be a legal tender issued by the central bank but in digital form instead. The currency will have exchangeable characteristics. In easier terms, it will be just like money that everyone uses but in digital format.
The Central Bank Digital Currency (CBDC) has been proposed under blockchain as well as other technologies by the finance ministry. RBI is expected to begin its issue between 2022 and 2023. Many are speculating that this step is going to be fruitful for the Indian economy. It will give a boost to digitalization while facilitating better currency management in the country. That’s why several big names are coming forward and appreciating this tenure’s budget.
Pranay Bhatia who’s the partner and leader with tax regulatory services called it a most awaited announcement. According to him, in the present times, it has become crucial to understand cryptocurrency or digital money in general. This step will ensure the understanding of the strategy for tax-related crypto-assets. The finance ministry has made it apparent how transactions will be tracked.
They have announced no deduction cost, tax rate at thirty percent along with a tax on mining as well as gifting. There is no offset of loss against earnings from other sources too, he further added. He expressed how it’s a good sign but also brought a light on the challenges that might occur after this step. It will be pretty challenging to track transactions of certain nature in the absence of a central regulator, he said.
A recent report published by RBI described CBDC as a safer medium for people in the coming days. Its complexity will directly be proportionate to the design choice at different levels, the report further added. According to the RBI, the digital currency is going to be unique and not something on a private element.