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India's finance minister says central bank to launch digital cryptocurrency

01 Feb, 2022
India's Finance Minister Nirmala Sitharaman holds up a folder with the Government of India's logo as she leaves her office to present the federal budget in the parliament in New Delhi, India, February 1, 2022. Reuters photo
India's Finance Minister Nirmala Sitharaman holds up a folder with the Government of India's logo as she leaves her office to present the federal budget in the parliament in New Delhi, India, February 1, 2022. Reuters photo

MUMBAI: India's finance minister on Tuesday said the central bank will introduce a digital currency in the next financial year using blockchain and other supporting technology.

"Introduction of a central bank digital currency will give a big boost to digital economy. Digital currency will also lead to a more efficient and cheaper currency management system," Nirmala Sitharaman said on Tuesday while presenting the federal budget.

India's central bank has voiced "serious concerns" around private cryptocurrencies on the grounds that these may cause financial instability.

The Indian government has also decided to levy 30% tax, the highest tax band in the country, on income arising out of digital assets, Sitharaman said.

Aside from placing earnings from cryptocurrencies and non-fungible tokens (NFTs) in India's highest tax band, Sitharaman also said losses from their sale could not be offset against other income, delivering another disincentive to trading and investment in digital assets.

Industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around 400 billion rupees ($5.37 billion).

No official data is available on the size of the Indian crypto market.

Proponents of digital currencies have been hoping that the establishment of a formal tax framework could at least spare the crypto industry from some of the more draconian measures that the government had been considering.

New Delhi has been mulling tough regulations around digital currencies in India for several months.