India’s central bank will issue a digital rupee in the 2022-2023 financial year which begins Apr. 1. India’s finance minister Nirmala Sitharaman said the introduction of the digital rupee would be based on “blockchain and other technologies.”
Ms Sitharaman also said the magnitude and frequency of digital asset transactions “have made it imperative to provide for a specific tax regime”, where profits from transactions are taxed. The tax would also apply to gifts of digital assets, with recipients being liable to pay the levy. Taxes for all other transactions would be deducted at source. It included ramping up spending on infrastructure and extended credit guarantees to struggling small businesses. Asia’s third largest economy has been hit hard by the pandemic with major job losses and rising inflation.
India’s plan to introduce a digital rupee was welcomed by cryptocurrency traders. In 2018, the Reserve Bank of India (RBI) banned the trading of cryptocurrencies. The bank had previously issued several warnings about the “economic, financial, operational, legal, consumer protection and security-related risks” of virtual currencies such as Bitcoin.
However, the ban was overturned by the country’s supreme court two years later. In November, the government signalled that it was preparing to crack down on most cryptocurrencies in the country under a long-awaited bill. It said at the time that the planned legislation was aimed “to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India”.