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The Indian government is dabbling in digital currencies, and with the e-Rupee, this country might become among the first ones to fully adopt a legal tender based on blockchain. It is worth noting that this nation's parliament started investigating cryptocurrencies like Bitcoin and Ethereum more after the coins exploded back in 2021. The country also imposed a hefty 30% tax on all proceeds from cryptos back in 2022.
India announced e-Rupee in the 2022-23 fiscal year, and it is currently in a closed beta state where some select users can avail of the features of this new digital currency via invitation from their banks only. The country's regulatory banking body, the Reserve Bank of India, envisions making it a legal tender that can be employed without a bank account.
It is worth noting that the new digital rupee comes as a second innovation after India embraced the digital one-tap money transfer system UPI (United Payments Interface).
How is the e-Rupee different from Bitcoin?
India's new e-Rupee, or digital rupee, is very similar to Bitcoin. Both currencies are based on a blockchain. However, their modes of operation are different. While the Satoshi Nakamoto-made currency is based on a public blockchain where every transaction is anonymous, the e-Rupee is a central bank digital currency (CBDC), much like JamDex and the e-Naira.
This means two things:
- While Bitcoin has no backing or a managing body (it is decentralized), all liabilities of the digital Rupee are handled by the Reserve Bank of India.
- Unlike Bitcoin, it is based on a private blockchain.
Unlike the rupee, this digital currency will never take a physical form, thereby saving money and resources spent on printing and minting. The Indian government currently spends ₹49.84 billion ($608 million) every year to produce the local currency. Since the Indian population is rather huge, a digital currency will help get rid of this expenditure, which is solely borne by the nation's taxpayers.
Are other countries also planning to introduce digital currencies?
India is not the only country to start the development of blockchain-based currencies. According to a report originally published on Forbes, more than 100 nations are experimenting with CBDCs (Central Bank Digital Currencies) at one stage or another. However, only a handful of countries have gotten close to realizing the plans and launching a digital currency.
Other similar offerings introduced by various governments include Nigeria's e-Naira, The Bahamas' Sand Dollar, the Eastern Caribbean Bank's DCash (which is accepted in Latin American countries like Anguilla, Antigua and Barbuda, Commonwealth of Dominica, Grenada, Montserrat, St Kitts and Nevis, Saint Lucia, St Vincent, and the Grenadines), as well as Jamaica's JamDex.
In the United States, the Federal Reserve of Boston and the Massachusetts Institute of Technology (MIT) are also developing a Digital Currency that could be introduced as a CBDC. Codenamed Project Hamilton, the initiative will take a few years before any public launches.
