Quote : Digital Currency and Digital Assets

 Arvind Chari’s Quote - Budget Announcement on Digital Currency and Digital Assets

Digital Currency

A timeline to launch a Digital currency by the RBI suggests that much work has been done and the government and the RBI have their blueprints and the mechanism of the digital currency.

It will be interesting to see how it's launched. Whether the RBI directly issues digital rupees to the citizen (tier 1). Or whether the disintermediation happens through the banking system, with the RBI issuing the digital currency to the bank and the banks passing it on the individuals with the bank account

A direct Tier 1 issuance has its benefits in terms of the government and the RBI using the digital rupee as a means for direct benefit transfers, time-based coupon payments, time-based income transfers. Exciting times, and once launched, as we saw with the UPI, it will spawn other private-sector innovations.

Digital Assets

The government by choosing to tax digital assets (read cryptocurrency, NFTs) means that they are not outright banned. This is a good step. Banning it would have prevented innovation and new development. These are new technologies and new age assets and we yet do not know their significance for the future. We would still expect the government and RBI to come out with detailed regulations to foster the growth of the industry as well as enable investor protection.