What is the difference between Cryptocurrency and Digital Currency? Check Here

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Renu Sharma

New Delhi, 2nd February 2022: Union Finance Minister Nirmala Sitharaman during her Budget 2022-23 speech on February 1 announced a 30 percent tax on any income from the transfer of digital assets, including cryptocurrencies and non-fungible tokens (NFTs). And, soon after, the Finance Minister also announced India’s own digital currency.

The Finance Minister said that the Reserve Bank of India (RBI) will soon issue its digital currency. Central Bank Digital Currency (CBDC) may be issued any time in the financial year 2022-23.

The announcement of CBDCs soon after the announcement of taxation for digital assets has left many wondering whether CBDCs will also be taxed. This happened because most people consider cryptocurrency and digital currency to be the same. However, Finance Minister Nirmala Sitharaman made it clear in a press conference after the budget speech that cryptocurrency (she only said crypto, did not add currency in front of it) is not a currency. Currency is that, which is issued by the central bank, which it will issue this year.

Difference between cryptocurrency and digital currency?

Digital currency is the electronic form of existing paper money (notes). It can be used in contactless transactions, such as making payments to someone else electronically from your bank account. All online transactions involve digital currency. However, when you withdraw that money from a bank or ATM, that digital currency turns into cash.

A cryptocurrency is a store of value, protected by encryption. Cryptocurrencies are privately owned and are created using advanced blockchain technology. Cryptocurrency is not yet regulated in most countries. However, digital currency is regulated by the central bank.