India's finance minister has said the country will launch a digital version of the rupee as early as this year.
In her annual budget speech, Nirmala Sitharaman also outlined plans for a 30% tax on income from digital assets.
It would put profits from trading or transferring cryptocurrencies and non-fungible tokens in the country's highest tax band.
India is the latest major economy to announce an official virtual currency, as China trials the digital yuan.
"Introduction of a central bank digital currency will give a boost, a big boost to (the) digital economy," Ms Sitharaman said on Tuesday.
"Digital currency will also lead to a more efficient and cheaper currency management system," she added.
Ms Sitharaman also said the magnitude and frequency of digital asset transactions "have made it imperative to provide for a specific tax regime", where profits from transactions are taxed.
The tax would also apply to gifts of digital assets, with recipients being liable to pay the levy. Taxes for all other transactions would be deducted at source.