Union Budget 2023: Will Blockchain-Based Digital Currency Come Of Age?

Central Bank Digital Currency or CBDCs have captured the imagination of central banks around the world. Recently, the Reserve Bank of India (RBI) launched the pilot ‘digital rupee’ project and reports suggest that it may further expand the project “based on the learnings from the current pilot.”

Governor Shaktikanta Das’ recent statement on CBDC adoption indicates that ‘digital rupee’ may get a boost.

“Central banks issued digital currencies are the future of money and its adoption can help save on logistic and printing costs,” he said at a recent event. 

With the Union Budget around the corner, industry watchers expect some announcement regarding the digital rupee. 

“I think CBDC will be a hot topic of discussion in this year’s Budget,” says Kamlesh Nagware, CTO at Snapper Future Tech, a blockchain firm. He believes that Finance Minister Nirmala Sitharaman may announce measures to enable offline, cross-border payment and digital asset ecosystem for CBDCs.

The Government of India has been a votary of CBDCs. In her last Budget speech, Ms Sitharaman said ‘digital rupee’ will lead to a more efficient and cheaper currency management system.

For the unversed, CBDCs are the digital version of the official currency, backed by the central bank. They are very often backed by blockchain technology, as is the case with the digital rupee.

“In the CBDC trial phase, 16,000 users made e-rupee transactions in one month. The beginning is excellent and holds enormous potential for the future of e-rupee,” believes Amogh Tiwari, Founder of DayFi, an NFT-based financial utilities company.

Experts believe that blockchain is likely to get impetus in the coming years, with the Ministry of Electronics and Information Technology coming out with a ‘National Strategy on Blockchain’ in December 2021. Interestingly, this report mentions the idea of a government-backed digital currency wallet for transactions in the farm sector. 

“We expect proper allocation for blockchain and its application on Indian infrastructure like cargo, finance, digital documents etc in this year’s Budget,” says Mr Tiwari. 

CBDCs are among the most well-known use case of blockchain technology, which is considered safe, trustworthy, and transparent. Any discussion on CBDCs, however, is incomplete without their comparison with cryptos, which are also run on the principles of blockchain.

With the RBI governor calling crypto currency “nothing but gambling” while calling for an outright ban and the Finance Minister seeking an international collaboration for crypto regulation, the future of Indian crypto market continues to be in limbo. 

“There is no relation between crypto and CBDC. The government will focus on the latter as an alternative,” says Mr Nagware. Mr Tiwari too speaks on similar lines and adds that CBDCs represents a significant step in the adoption of blockchain. 

Both believe that digital rupee will help in larger adoption and mainstreaming of digital currencies in general across the country. “E-Rupee will help to build stronger regulations because the government and stakeholders could have wide level understanding of digital currency and digital assets,” says Mr Nagware. 

According to one estimate, adopting digital assets like CBDCs and other blockchain-backed assets can help India add $1 trillion to its economy by 2032.