CBDC And Its Constitutional Status In India
Saharshad Pandey, Christ University, Delhi NCR
Introduction
The end of the Silver Standard & The Rise of CBDCs (Central Bank Digital Currencies) have sparked a complete metamorphosis regarding monetary policy across the globe, leading all central banks worldwide to reconsider the role and structure of currency in an increasingly digital world. The formal launch of a digital currency retail sandbox in India for 2025, along with the formal introduction of e₹ (digital rupee) as a sovereign-backed digital currency in an unprecedented process that started in December 2022, are some of the reasons more than 100 central banks are exploring modern monetary systems around the world. In the context of India, the RBI is experimenting to find out a way in which money could be stabilized in this digital economy.
The Finance Act 2022 amended the Reserve Bank of India Act, 1934 via growing the definition of the term “forex” to encompass virtual foreign money accordingly, the virtual rupee has been acknowledged in statute but there has been no constitutional instructional or judicial discourse on the legitimacy of the concept of a digital sovereign currency.
Although the Legislative Branch of the Parliament can introduce the bill to regulate the CBDC, the Digital Currency's Constitutional Status will not be changed. There are various constitutional issues that will arise due to the e-launch. One of these is the issue of Data Governance and Privacy. According to Justice K.S Puttaswamy, in a case involving the Union of India, Article 21 of the constitution states that “Data Protection should be a part of the Legislative Process.”
Legislative Competence and Sound Currency Status
In the Indian Constitution, the task of regulating money market, issuing currency notes and deciding legal tender are taken care by the Central Government. This has been done through Entry 36 (currency, coinage, legal tender) and Entry 37 (foreign exchange) in the Union List of the Seventh Schedule to the Constitution. This shows that the makers of the Constitution were of the opinion that in a country the control of fiscal policy and monetary policy should be with the Central Government and that there should be uniformity in monetary management in the country.
