When present the Union Budget 2022, Finance Minister Nirmala Sitharaman announced that the government will introduce the Digital Rupee in the fiscal year 2022-23. It will also introduce taxes of 30 percent for virtual assets. Take a look at these two ideas and the way they’ll perform.
The government is planning to issue the digital Rupee or Central Bank Digital Currency (CBDC) during the fiscal period 2022-23. In addition the Budget also proposes to impose taxes of 30% of virtual currency, thereby allowing trading in private cryptocurrencies as well as non-fungible tokens. This is in general accordance with the plans of the Centre to create an electronic currency that is fiat, but excluding the use of cryptocurrency that is not really legal.
When making the Union Budget on Tuesday, Finance Minister Nirmala Sitharaman announced that the Digital Rupee would become the responsibility of the RBI by using blockchain technology with the next fiscal year. Digital currency will result in lower costs and quicker management of currency.
But the Finance Minister didn’t make reference to the Cryptocurrency Bill to regulate private cryptocurrency within her speech on the Budget 2022. Indian investors have invested around the sum of Rs 45,000 crore into private cryptocurrency. In the past, RBI has been in opposition to private cryptocurrency as they pose an issue from the macroeconomic and stability of financial markets.
And Ms. Finance Minister, pl do tell the Nation –
Is Crypto Currency now legal, without bringing the Crypto Currency Bill, as you tax the crypto currency?
• What about its regulator?
• What about regulation of Crypto Exchanges?
• What about investor protection?#Budget2022
— Randeep Singh Surjewala (@rssurjewala) February 1, 2022
What will the tax structure function?
The Finance Minister added that the 30 percent tax for virtual assets will not be referred to as a replacement of alternative income (meaning it can’t be claimed as a deduction) In addition, there is 1 percent TDS which will be imposed for transactions using digital assets to track transactions in Budget 2022.
The Central Board of the RBI was recently discussing various aspects of the state of the central bank’s digital currency. RBI officials told to the committee that there is a trial program to introduce CBDC will be announced soon. The RBI is currently investigating two aspects: wholesale accounts with retail. While much work is being done already on wholesale account accounts, retail aspect is somewhat complicated which is why the bank has been spending some time working on the issue.
What is CBDC?
CBDCs are the electronic or virtual version that fiat currencies (like that of Indian rupee and US dollar). Other central banks like those of the US Fed and the People’s Bank of China are creating to create their own electronic currencies. CBDC is a CBDC is the legally-issued tender by central banks in digital format. It’s similar to an actual fiat currency, and is convertible one-to-one with fiat currency. Its form is only different.
There are various models suggested by experts in technology and evangelists on what it is possible that the Digital Rupee could be transacted however a formal announcement from the Reserve Bank of India will likely specify the manner in which Digital Rupee will be transacted by people. One of the major differences will be that the Digital Rupee transaction will be instantaneous , as opposed to the current experience of digital payments.
What is the need for CBDC?
According to Investopedia the goal is for users to have the convenience and security of digital banking as well as the regulated, reserves-backed circulation of traditional banks.
CBDC Vs VCs
CBDC isn’t like the virtual currency (VCs) that have grown in popularity in the past decade. Private virtual currencies stand against the concept of money as it was in the past.
“They aren’t commodities or claims on commodities because they are not of any intrinsic value. Some assertions that they are similar to gold are clearly apprehensive. In general, and especially for the most well-known models they do not reflect any individual’s debts or obligations. The issuer is not there. They are not currency (certainly not money) in the sense that it has been used historically.” RBI Deputy Governor T Rabi Sankar has said in Budget 2022.