New Delhi, May 15 (Agency)
Top officials of the Reserve Bank of India (RBI) have told a parliamentary committee that cryptocurrencies could lead to “dollarisation” of a section of the economy, which would be against India’s sovereign interests. Sources said that top officials, including RBI Governor Shaktikanta Das, presented their views before the Parliamentary Standing Committee on Finance headed by former Minister of State for Finance Jayant Sinha. He apprised them of his apprehensions regarding the cryptocurrency and said that it would pose challenges to the stability of the financial system. According to a member of the committee, RBI officials said, “This will seriously undermine the central bank’s ability to set monetary policy and regulate the country’s monetary system.” It has the potential to become a medium of exchange and can replace the rupee in financial transactions both domestically and across the border.
Central bank officials said the currency “could occupy a part of the monetary system and could also undermine the RBI’s ability to regulate the flow of money in the system”. Cryptocurrencies can also be used for terror financing, money laundering and drug trafficking, and not only this, it can pose a major threat to the stability of the country’s financial system. He told the parliamentary committee, “Almost all cryptocurrencies are based on the dollar and are issued by foreign private institutions. In such a situation, it is possible that this may lead to dollarization of some part of our economy, which will be against the sovereign interests of the country.
RBI officials said that cryptocurrencies will also have a negative impact on the banking system as being lucrative assets, people may invest their hard earned money in them resulting in lack of resources with banks to lend. In this year’s budget, Finance Minister Nirmala Sitharaman had announced a 30 percent tax on trading in cryptocurrencies and related assets. According to an estimate, the number of people investing in crypto in the country is between 15 million and 20 million, who have about $ 5.34 billion in crypto currency. There is no official data available about the size of the crypto market in India. This parliamentary committee is in extensive consultation with the finance regulators.