Experts see digital rupee as a big boon to India

The launch of a new digital rupee in the upcoming year will boost financial inclusion in Asia’s No.3 economy and eventually make more Indians cut their dependence on physical cash, according to accountants, currency exchange operators and crypto experts.

The move will also provide a cost-efficient alternative to cash and make international transactions easier, they said.

The launch “would give great comfort and trust in the use of digital currency,” Lily Vadera, a former executive director at the Reserve Bank of India told DH.

It “would provide a cost-efficient alternative to cash as the cost of printing, storing, transportation and distribution of currency can be reduced considerably and hopefully bring down the dependence of cash in the economy,” said Vadera, who is currently a senior advisor at law firm Cyril Amarchand Mangaldas.

The comments came just a day after Finance Minister Nirmala Sitharaman used her budget speech to reveal that the Reserve Bank of India will launch its digital currency in the year starting April 2022 and tax the income from the transfer of virtual assets at 30 per cent.

The digital rupee, or the central bank digital currency (CBDC), could be exchanged for cash, Prime Minister Narendra Modi clarified on Wednesday, adding that it will make online payments more secure and give a push to the digital economy down the lane.

Also read: Digital rupee can be exchanged for cash: PM

Denizens of the digital currency world agreed.

They consider the CBDC as yet another mode of distribution and payment of the Indian Rupee, akin to currency notes, United Payments Interface and RBI-approved methods of fund transfer such as NEFT and IMPS.

The experts see RBI determining the supply of the digital rupee and also tracking how it gets distributed to various individuals. If the CBDC runs on blockchain technology, it will be extremely advantageous to the average Indian, they pointed out.

Efficient & Inclusive

The RBI’s digital currency will help even those who do not have a bank account as it can be digitally transferred digitally, Bhagaban Behera, CEO & Co-Founder, Defy said.

“This type of transaction wouldn't need to pass through multiple banks and take several days. It could all happen nearly instantaneously on one digital ledger. Consumers also wouldn't need a commercial bank account to use CBDC”, Behera said.

Others such as Vikram Subburaj, the CEO of Giottus Crypto Exchange, focused on the digital version’s efficiency and ability to overcome network issues tied to UPI and NEFT transactions.

Also Read — Union Budget 2022: Tough news for millennials, modern investors

“Being on blockchain will also make international transactions simpler - a person in the US or Europe can easily transact with the Indian Rupee if anyone prefers to,” Subburaj told DH.

One disadvantage at the start would be the fact that only a small share of the Indian Rupee in circulation may be on the blockchain and hence large transactions may have to wait, he said.

Others such as Amit Jaju, Senior Managing Director at Ankura Consulting’s India arm urged the government to closely evaluate the broader concerns related to money laundering, fraud, data privacy and cyber security tied to cryptocurrencies.

Analysts said they did not expect a major change in the valuation of the Indian Rupee because of the launch of the digital rupee.

Bengaluru-based chartered accountant B E Kumar Prasad urged people to pick the RBI-backed digital rupee over unregulated crypto assets citing the lower risks generally associated with an asset regulated by a central bank.

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