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RBI plans an upcoming Bill for digital currency

  • Posted By
    10Pointer
  • Categories
    Economy
  • Published
    23rd Apr, 2021

Context

The government is planning for a law to ban private digital currencies and is favouring a digital currency backed by the Reserve Bank of India.

Cryptocurrency and Regulation of Official Digital Currency Bill, 2021

  • It will prohibit all private cryptocurrencies and lay down the regulatory framework for the launch of an “official digital currency”.
  • The new cryptocurrency bill might impact the existing investors who have invested in bitcoin in the country. 

RBI and digital currency

  • RBI is exploring DLT (Distributed Ledger Technology) in improving financial market infrastructure.
  • A fiat currency will be protected from the volatility and fluctuations in Bitcoin and other cryptocurrencies.
  • RBI had expressed concern over the cryptocurrencies and says that it supports the illegal activities, and pose a threat to financial stability.
  • In April 2018, RBI banned banks and other regulated entities from supporting crypto transactions after the digital currencies were used for frauds.
  • In March 2020, the Supreme Court struck down the ban as unconstitutional.
  • Some other central banks have also started to support the regulation of cryptocurrency. Recently China has also issued its Central Cryptocurrecny.

How it will be different from the Bitcoin?

  • Bitcoin is a decentralized cryptocurrency which means that it is not controlled by any central authority like a central bank.
  • Whereas, the digital yuan will be issued by the People’s Bank Of China.
  • Bitcoin is also built on a technology known as blockchain but might have a different technical make up from the digital currency.
  • Bitcoin are completely anonymous. However, the digital currency may have a controlled anonymity.

The Chinese government has started issuing blockchain-powered digital currency to its citizens chosen through lottery system.

About the digital Yuan

  • Issuing authority: It is a central bank digital currency which aims to replace some of the cash available in circulation.
  • Blockchain technology: It is a blockchain-powered digital currency issued by the central bank.
  • Legal: It will be a legal tender in China and will carry no interest paid on it.
  • Significance: This currency will be easy to use and protect form counterfeiting.
    • It has tendency to reach the unaccounted ones.
  • Distribution: The currency could be distributed either through the lottery system by the local government or by the Central bank to commercial bank to circulate it further.
  • Controlled system: It will be have a controllable anonymity that would involve the disclosing of digital wallets to PBOC as the sole third party.
    • Users would have a “loose coupling of accounts”, means that their current bank account may not be too closely linked to their digital yuan account.