GS#3_ Science and Technology– Developments and their Applications and Effects in Everyday Life.
- China in February launched the latest round of pilot trials of its new digital currency, with reported plans of a major rollout by the end of the year and ahead of the Winter Olympics in Beijing in February 2022.
- While several countries have been experimenting with digital currencies, China’s recent trials in several cities have placed it ahead of the curve and offered a look into how a central bank issued digital tender may impact the world of digital payments.
- Digital currency is a payment method which exists only in electronic form and is not tangible.
- Digital currency can be transferred between entities or users with the help of technology like computers, smart phones and the internet.
- Although it is similar to physical currencies, digital money allows borderless transfer of ownership as well as instantaneous transactions.
- Digital currency is also known as digital money and cybercash.
- E.g. Cryptocurrency
India’s Stand on Digital Currency
- The Reserve Bank of India (RsBI) had banned cryptocurrencies in 2018.
- RBI had considered cryptocurrencies as a poor unit of account and also demonstrated by their frequent and high fluctuation in value.
- RBI also stated that it pose several risks, including anti-money laundering and terrorism financing concerns (AML/CFT) for the state and liquidity, credit, and operational risks for users.
- It had also said that it would seriously consider developing a sovereign digital currency when the time is appropriate
- Subsequently, the Supreme Court has struck down a circular of the RBI, which bans financial institutions from enabling deals in digital or cryptocurrencies.
- The ban was challenged by the Internet & Mobile Association of India (IAMA) sighting that dealing and trading in cryptocurrency was a legitimate business activity and that the RBI did not have jurisdiction over it as these assets could be classified as commodities rather than currency.