Cryptocurrencies Can Result in Dollarisation of Indian Economy, RBI Officials Said to Warn Parliamentary Panel

RBI officials are said to have expressed their apprehensions about cryptocurrencies, said these pose challenges to the stability of the financial system.

By Press Trust of India | Updated: 16 May 2022 12:18 IST

Cryptocurrencies Can Result in Dollarisation of Indian Economy, RBI Officials Said to Warn Parliamentary Panel

Cryptocurrencies have the potential to be a medium of exchange and replace the rupee

Highlights

BI officials said it will have a negative impact on the banking system
There are an estimated 15 million to 20 million crypto investors in India
No official data is available on the size of the Indian crypto market

Cryptocurrencies can lead to "dollarisation" of a part of the economy which would be against India's sovereign interest, top officials of the RBI have told a parliamentary panel, according to sources.

Briefing the Parliamentary Standing Committee on Finance chaired by former minister of state for finance Jayant Sinha, top officials of the RBI, including its governor Shaktikanta Das, clearly expressed their apprehensions about cryptocurrencies and said these pose challenges to the stability of the financial system, sources told PTI.

"It will seriously undermine the RBI's capacity to determine monetary policy and regulate the monetary system of the country," a member of the panel quoted RBI officials as saying.

[Sponsored] Samsung Galaxy S24: The Ultimate Camera Phone With Smarter On-Device AI

Pointing out that cryptocurrencies have the potential to be a medium of exchange and replace the rupee in financial transactions both domestic and cross border, central bank officials said these currencies "can replace a part of monetary system it will also undermine the RBI's capacity to regulate the flow of money in the system".

Cautioning that besides being used for terror financing, money laundering, and drug trafficking, cryptos pose a bigger threat to the stability of the financial system of the country, the central bank officials said.

“Almost all cryptocurrencies are dollar-denominated and issued by foreign private entities, it may eventually lead to dollarisation of a part of our economy which will be against the country's sovereign interest,” the officials told the members.

Bitcoin Leads Marketwide Surge After a Horrid Week of Trade

Discussing the impacts of cryptocurrency, the RBI officials said it will also have a negative impact on the banking system as these being attractive assets people may invest their hard-earned savings in these currencies which may result in banks having lesser resources to lend.

In Union Budget presented earlier this year, Finance Minister Nirmala Sitharaman introduced a tax on trading in cryptocurrencies and related assets like non-fungible tokens (NFTs) at a flat 30 per cent and one per cent of tax will be deducted at source (TDS) when any such transaction takes place.

There are an estimated 15 million to 20 million crypto investors in India, with total crypto holdings of around $5.34 billion (roughly Rs. 41,530 crore).

No official data is available on the size of the Indian crypto market.

The Sinha-led panel which has former GST council head Sushil Modi, former Union Ministers Manish Tewari and Saugata Roy as its members have been holding comprehensive deliberations with financial regulators.

As statutory bodies, both RBI and SEBI report to Parliament and the panel has the parliamentary responsibility to call upon the officials of these regulators over the financial and economic issues of the country.

Sinha, a pass out of IIT Delhi and MBA from Harvard Business School, was the Minister of State for Finance during the previous Modi government

How is Alexa faring in India? We discuss this on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.

Affiliate links may be automatically generated - see our ethics statement for details.

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.