RBI to introduce digital rupee from the Financial Year 2022-23
The finance minister has further added that the government has decided to impose a 30% tax on income gain due to the transfer of digital assets from the next financial year. While calculating the income earned through
There was a lot of debate and confusion regarding the legality of digital currency in India. To clear the air, the RBI has announced the issue of digital currency using blockchain technology soon. The finance minister Nirmala Sitaraman has confirmed the news and said that the government has decided to introduce digital coins in the new fiscal year. It affirms the government's intention to make digital coins legal tender. She opined that digital currency would help the government create a robust, convenient currency management system in India.
The finance secretary- TV Somanathan, said that RBI issued digital coins only will have legal backup. The RBI doesn't intend to make Bitcoin or Ethereum a legal tender as it wants to maintain strict control over the circulation of digital money in the nation. Somanathan also said that Ethereum, bitcoin, non-fungible tokens help people buy gold or diamond crypto assets. It will not have a legal backup because the parties to the transaction decide the value of those assets. If anyone incurs a loss from transactions relating to digital coins, it is a personal loss because it doesn't have legal backup. The Indian government doesn't own any responsibility for such a loss.
The finance minister has further added that the government has decided to impose a 30% tax on income gain due to the transfer of digital assets from the next financial year. While calculating the income earned through private digital coins, no deduction of expense incurred or any allowance will be permitted, other than the acquisition cost. The government has planned to have a balanced approach while framing regulations for the digital country. Any imbalance will hamper the financial stability of the nation.
Last year the government of India decided to ban all forms of digital currencies in India. But RBI showed positive reactions to the introduction of digital currency in the country. The government gave up the idea of a ban on digital currency and decided to conduct a meeting of stakeholders to pick opinions before confirming its decision. The draft bill says that the central bank would issue a digital rupee banning all the other private cryptocurrencies. It has also informed the public that RBI intends phased introduction of digital currency to avoid confusion.
Government-backed digital coins are a new avatar of the currency in the world. Technological advancement compels any country to adapt to the changes without which our economy will lag behind other economies in the world. These government-backed digital currencies promise to strengthen our economy digitally and shift back the power from individuals to the state. It is why the government has decided to ban all kinds of private digital currencies like Bitcoin and Ethereum. The introduction of government-backed e-money will also help catch pace with digital giants like China.
The government and RBI have started studies on the possible financial implications of central bank digital currency on the banking sector. They decided to take the opinion of banks because they are one of the stakeholders, and ignoring their opinion would cripple the financial sector immensely. Banks said that introducing digital currency would disrupt their relationship with the people as they are the intermediary between RBI and the people of India.