Reserve Bank of India aims for a graded approach to CBDC release

According to the nation’s monetary policy, the Reserve Bank of India (RBI) is aiming to implement its CBDC plans through a graded approach. 

The central bank of India released its Annual Report 2021-22 last week, which said that it “proposes to adopt a graded approach to the introduction of CBDC, going step by step through stages of Proof of Concept, pilots, and the launch.”

The implementation of CBDC, which is set to begin in the current fiscal year 2022-23, will be in line with financial stability, currency, and payment systems, according to media reports citing an RBI report.

A proof of concept is a step in the development of an idea in which it is put to the test to see if it can be implemented and provide the same outcomes. The RBI report states:

“The Reserve Bank is engaged in the introduction of a central bank digital currency (CBDC) in India. The design of CBDC needs to be in conformity with the stated objectives of monetary policy, financial stability, and efficient operations of currency and payment systems.”

Indian Finance Minister Nirmala Sitharaman promised in the Annual Budget 2022-23 that the CBDC would be introduced in the financial year 2022-23, pegged to the Indian rupee. Blockchain and other related technologies will be used by the Indian CBDC or Digital Rupee. The government had also moved ahead with the idea of a clear set of regulations by imposing a 30% tax on all crypto profits.

Crypto regulation in India

Initially, the Government of India intended to present a bill in parliament that would prohibit the use of cryptocurrencies and replaces them with an official digital rupee. Last year, it postponed the bill twice: once during the budget session in February and again during the winter session in November.

Finally, it scrapped the proposal of banning or regulating cryptocurrencies for the time being and amended the RBI Act of 1934 to create a legal foundation for the creation of the Digital Rupee, or India’s CBDC.