RBI plans an upcoming Bill for digital currency
- Posted By
23rd Apr, 2021
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.