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Union Finance Minister Nirmala Sitharaman has flagged 'anonymity' as an 'inherent risk' in blockchain technology, but also added that the government supports the use of the same.

Sitharaman's remarks come ahead of the launch of the budgetary announcement of central bank digital currency (CBDC) which is based on the blockchain technology itself and is billed as being similar to the paper currency carried in our wallets.

The FM said that using distributed ledger technology (DLT), which is also called blockchain, is “absolutely imperative" and also advised taking precautions due to the 'anonymity' factor in it.

"…the anonymity is what ... one unknown element in this whole thing. The anonymity of the person or whoever or the robot is the one which we have to be readying ourselves as … a future challenge," Sitharaman said, addressing an NSDL event.

Terming anonymity as a “powerful imponderable" in the whole equation, Sitharaman said, "unless we are able to guard ourselves against that anonymous element which can itself pose an inherent risk, we probably will be exposing ourselves much more than ever we would have imagined.

The minister's remarks come ahead of the launch of the budgetary announcement of central bank digital currency (CBDC) which is based on the blockchain technology itself.

In addition to this, Sitharaman said private cryptocurrency assets like Bitcoins are “fairly well spread" in India. Buch said the strengths of DLTs include transparency, real-time, infinite divisibility and it is a cost-effective medium.

On retail investors, the FM said the investment journey has transformed in the last two or three years, with a new Demat account opening zooming to 26 lakh per month in FY22 from 12 lakh in FY21 and just 4 lakh a month in FY20. She said the retail investors act as “shock absorbers" as the foreign portfolio investors have come in and gone as per the global cues. Pointing out the total $4 trillion in custody value held by NSDL, Sitharaman said the buoyancy in retail account opening is a prime reason for the high asset value.

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