February 1, 2022
India’s central bank, the Reserve Bank of India (RBI), will introduce the Central Bank Digital Currency (CBDC) as India’s official digital rupee in 2022-23, finance minister Nirmala Sitharaman while presenting the Union Budget for 2022 before the parliament.
The announcement comes at a time of uncertainty for the private cryptocurrencies and how India might regulate it. It’s too early to say how the rollout of a sovereign Rupee-based digital currency might impact the world of cryptocurrencies in India.
Here is what you need to know:
- The CBDC is expected to be India’s official and sovereign digital currency issued by the RBI, which was initially proposed as part of India’s regulatory reforms on cryptocurrency. Yet, the government has not listed the Cryptocurrency Bill in the list of 15 proposed legislations that may come up before the parliament during this budget session.
- India’s central bank is working on a phased implementation of the digital currency with little or no disruption, said Pankaj Chaudhary, a minister for state in the Ministry of Finance, in a written reply.
- “The introduction of the CBDC will give a big boost to India’s digital economy. The digital currency will also lead to a more efficient and cheaper currency management system,” finance minister Sitharaman told the lawmakers.
- The issuance of CBDC would make a handful of nations including China that has already launched its own CBDC.
- Like many other central banks, the RBI has issued many warnings with regards to the users and holders of digital assets such as bitcoin.
- Sitharaman also announced that income tax will be levied against capital gains made in the field of “virtual digital assets”, which will include ‘private’ cryptocurrencies such as bitcoin, ether and the likes, as well as a growing market of non-fungible tokens (NFTs). Such gains will be taxed at 30% and no deductions can be claimed against investments made in digital assets such as cryptocurrencies.
- The finance minister also stated that a TDS (tax deducted at source) of 1% will be levied against investments in virtual assets above a “certain threshold”. Exact details regarding this threshold are yet to be revealed.
- Crypto players in India said that tax and TDS might hurt the sentiments in the crypto sector. “Taxation and TDS on Digital Assets have come as a sudden move for the industry,” said Arun Pandey, co-founder of NFT marketplace Beyondlife.club told Blockchain Asset Review. “It might hit user sentiments in the short term, however, we shall see how the ecosystem evolves in the country and are committed to work as per the rule of the land.”
- Earlier this month, it was reported that Indian central bank has opened a new department to regulate cryptocurrencies and formulate its own digital currency.
About the author
Tsering Namgyal is the chief content officer of the Blockchain Asset Review.