India is set to launch its digital rupee in 2022, making it the tenth country to venture into CBDCs. The disclosure, which was included in its 2022 Union Budget, was made known by Nirmala Sitharaman, the country’s finance minister. Speaking to a house full of parliamentarians, Sitharaman further explained that “the introduction of Central Bank Digital Currency (CBDC) will give an enormous boost to the digital economy.” “digital currency will also lead to a more efficient and cheaper currency management system.”
India’s digital rupee, which will be issued by the Reserve Bank of India (RBI) and built using blockchain and other related technologies, will fall under the category of CBDCs, meaning that the control and management of all digital rupees are vested solely with the Indian government. It is still unclear if decentralized cryptocurrencies like Bitcoin and Ethereum will be allowed full operations, side by side with a digital rupee or whether the government may toe the line of China and ban them altogether to pave the way for massive adoption. Already a bill to kick out private cryptocurrencies is rumored to be in the pipes but it comes with ‘exceptions’ according to the report.
Weighing on the 30% tax rule
The finance minister also proposed a 30% tax on all gains from crypto transactions as part of the government’s effort to scoop revenue off earnings from private crypto companies. The long-term goal to digitize India and its growing digital currency ecosystem are the two major drivers of the Indian government’s decision to float a digital rupee. However, the country is sparing no horse in its quest to control its entire financial sector and reap maximum gains from it.
Several private cryptocurrency issuers and investors on Twitter, have decried the move as an attempt to stifle decentralization and freedom which are the hallmarks of cryptocurrency.
India has seen a rise in crypto companies over the past decade, with two of its companies attaining unicorn status. It has also seen an uptick in scams as 9.6 million people, mostly gullible users, flocked to scam sites in 2021. The country has seized over $162 million in fraudulent crypto transactions and may look to tow the path of the US by enforcing its own kind of KYC on all transactions. This would be necessary for the 30% tax rate it plans to implement.
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