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The union government today informed the Parliament that it has received a proposal from Reserve Bank of India (RBI) last month for amendment to the RBI Act, 1934 to enhance the scope of the definition of 'bank note' to include currency in digital form.

"The RBI has been examining use cases and working out a phased implementation strategy for introduction of Central Bank Digital Currency (CBDC) with little or no disruption," the Minister of State for Finance said in a written reply to Lok Sabha.

The minister further stated that introduction of a digital currency has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk.

"Introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option. There are also associated risks which need to be carefully evaluated against the potential benefits," he said.

Earlier during the day, Union Finance Minister Nirmala Sitharaman has informed the Parliament that the government has no proposal to recognise Bitcoin as a currency in the country. She also informed the house that the government does not collect data on Bitcoin transactions.

The government is all set to introduce the ‘Cryptocurrency Bill’ in the current session of Parliament, that seeks to prohibit all private cryptocurrencies, barring a few exceptions.

The government plans to allow only certain cryptocurrencies to promote the underlying technology and its uses, according to a legislative agenda for the Winter Session.

India has had a hot-and-cold relationship with cryptocurrencies in the past few years. In 2018, the country effectively banned crypto transactions, but the Supreme Court struck down the restriction in March 2020.

Through the cryptocurrency and Regulation of Official Digital Currency Bill, 2021, India is also looking to make a framework for the official digital currency that will be issued by the Reserve Bank of India. The central bank has voiced "serious concerns" about private cryptocurrencies and is set to launch its own digital currency by December.

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