“We expect the digital rupee to come out from the central bank this year because we see clear advantages in central bank-driven digital currency,” said Union Finance Minister Nirmala Sitharaman in her address at the India Global Forum on March 8, 2022. She reasoned that a digital currency enables bulk payments between countries, large transactions between institutions, and between several banks of different countries better in today’s day and age.
She revealed that there were a lot of consultations undertaken by the finance ministry with the Reserve bank of India (RBI) on the digital rupee and its design will be decided entirely by the central bank.
When asked about the regulation of cryptocurrencies in India, the minister reiterated that the consultations are underway by the ministry. Refusing to get into whether the government is looking to ban crypto, Sitharaman skirted the question of crypto’s future by stating that she sees an opportunity for revenue because many Indians see a future in crypto.
Finance Minister Nirmala Sitharaman’s remarks provide an insight into the Indian government’s reasoning behind rolling out Central Bank Digital Currency (CBDC), the digital form of a country’s fiat currency. Her statement, coupled with the budget announcement, suggests that the government is convinced about the prospects of CBDC and its benefits. Sitharaman also touched upon several issues concerning start-ups at the event.
Where does the government stand on digital banking?
There were a lot of start-ups present at the event which posed several questions regarding the government’s outlook towards start-ups. Kunal Shah, Founder and CEO, CRED, asked about the government’s views on digital lending through fintech companies and the role of digital banks.
Setting up Digital Banking Units (DBU): She said that the announcement made under the budget for 2022-23 did not mean that the government will be setting up these units but that it will enable a favourable environment through policy.
“So when I announced 75 DBUs, it implicitly meant that we are looking at people who want to set it up and we’ll be with them,” she said.
Sitharaman explained the government wants to set up DBUs because India lacks desired levels of financial inclusion even after 75 years of pushing through a nationalised banking network.
She added that this digitised approach will have to convert itself to be served through digital means completely. “The support from citizens assures me that digital banking is what they want rather than what is the way forward for the government. We’ll have to walk along with them, we’ll have to provide the facility for it,” she remarked.
How has the government addressed concerns around Intellectual Property?
Dr. Vijay Holimath, Founder, VIvidSparks IT Solutions, asked about the Intellectual Property (IP) concerns faced by his company which manufactures chips, and how they can be protected.
Sitharaman clarified that there had been extensive consultation on IPs in the last few years. An IP policy was put out following which it was adopted, as per the finance minister. The policy put in place several mechanisms to reduce the time taken for an application to get approval. The government also increased the number of approval-giving specialists who have been recruited to expedite the process. “There was the Intellectual Property Appellate Board which got revamped after it was abolished,” she said.
She informed the audience that the Delhi High Court has set up a separate bench to take care of litigation arising out of patent and copyright-related cases. She said there is a likelihood of similar benches coming up in Bengaluru, Hyderabad, and Mumbai so as to ensure there are no backlogs in litigation, and citizens and firms can avail of speedy disposals.
Sitharaman said that she was not averse to the idea of accelerators for start-ups. She urged the industry to inform her of the location for an accelerator along with other details in a proposal. She also evaded the question on the timeline for when the government will let start-ups list overseas to tap into foreign capital markets.
What did the annual budget have on CBDCs?
Sitharaman announced that the digital rupee, which will use blockchain technology, will be issued by the RBI in 2022-23 in her Budget 2022-23 speech.
“Introduction of Central Bank Digital Currency (CBDC) will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” Nirmala Sitharaman said.
It was the first official announcement specifying a timeline for its launch. The project has been in the works for quite some time now. The CBDC is the government’s attempt to take advantage of the benefits offered by blockchain technology and to also discourage the use of private crypto like Bitcoin as currency.
According to the Atlantic Council, over 90 countries including the US, China, Russia, and many in the EU are exploring CBDCs. So far, only nine of these countries have launched a digital currency.
What will be the future of cryptocurrencies in India?
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Also Read:
- Why RBI is being cautious in rolling out the Central Bank Digital Currency
- RBI governor reiterates concerns around crypto, adding tulips had more value during Tulip mania
- Summary: IMF’s report on CBDC advocates information-sharing among countries for successful roll-out
- PM Modi announces digital rupee will be interchangeable with physical cash, offering glimpse into India’s plan for CBDCs
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