Central bank digital currencies (CBDCs) have been argued to be governments’ replacement for cryptocurrencies which they say fuel money laundering, terrorism, tax evasion, and a host of others. Governments around the world have launched their digital currencies for quite a number of reasons but the motive is still the same, to be in control of the financial system. Cryptocurrencies do not need financial bodies and/or the government to be able to thrive, and this is one of the major drives for their adoption. Cryptocurrencies have been banned in countries across the world, and central bank digital currencies (CBDCs) which are controlled by the government and more or less can carry out the functions of cryptocurrencies have been introduced.
On Tuesday, India’s finance minister Nirmala Sitharaman said the country’s central bank will launch its central bank digital currency in its next financial year. According to the minister while delivering the annual budget, “Introduction of a central bank digital currency will give a boost, a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system”.
Although the minister gave no clear details about how the central bank digital currency will work or what people should expect, she did mention that it would be issued “using blockchain and other technology” and that the digital rupee will be introduced in the 2022-2023 financial year which starts on the first of April.
When India eventually introduces its central bank digital currencies, it would be one of the world’s largest economies to do so. Its announcement follows a trend of countries releasing their own CBDCs. For Instance, In October last year, African giant Nigeria introduced its CBDC called the e-naira. China, the world largest country also introduced its CBDC called the e-yuan. China has been working on its e-yuan since 2014 and is currently testing it across selected locations around the country. China has made the most progress when it comes to CBDCs.
Other countries are already looking at launching their CBDC s. Japan is looking into issuing its central bank digital currencies. Last month, the US Federal Reserve released a study into a digital dollar. It, however, did not mention if or when it would be issuing one.
Although Bitcoin isn’t illegal in India, like it is in China, the country is looking at regulating the sector as it takes steps towards issuing its CBDC.