Crypto Could Cause “Dollarisation” Of Economy: RBI Officials To Parliamentary Panel
New Delhi:
Top RBI officials told a parliamentary panel that cryptocurrencies could lead to “dollarisation” of a part of the economy, which would be against India’s sovereign interest.
Briefing the Parliamentary Standing Committee on Finance headed by former Minister of State for Finance Jayant Sinha, top officials, including RBI Governor Shaktikanta Das, categorically expressed their apprehensions about cryptocurrencies and said that they pose challenges to the stability of the financial system. Huh. told PTI.
“This will seriously undermine the RBI’s ability to set monetary policy and regulate the country’s monetary system,” a panel member quoted RBI officials as saying.
Stating that cryptocurrencies have the potential to become a medium of exchange and replace the rupee in domestic and cross-border financial transactions, central bank officials said that these currencies “can replace a part of the monetary system, this is the ability of the RBI to would also undermine the ability to regulate the flow of money in the system”.
In addition to being used for terrorism financing, money laundering and drug trafficking, crypto poses a major threat to the stability of the country’s financial system, central bank officials said.
“Almost all cryptocurrencies are dollar-denominated and issued by foreign private entities, this could ultimately lead to dollarization of a part of our economy that would be against the sovereign interest of the country,” officials told members.
Discussing the effects of cryptocurrency, RBI officials said that it will also have a negative impact on the banking system as these being lucrative assets, people can invest their hard earned money in these currencies, resulting in banks having access to lending. may have fewer resources.
In the Union Budget presented earlier this year, Finance Minister Nirmala Sitharaman introduced a tax in cryptocurrencies and related assets such as non-fungible tokens (NFTs) of flat 30 per cent and one per cent tax at source (TDS) to be deducted. when such a transaction takes place.
There are an estimated 15 million to 20 million crypto investors in India, with total crypto holdings of approximately USD 5.34 billion.
There is no official data available on the size of the Indian crypto market.
The Sinha-led panel, comprising former GST Council chief Sushil Modi, former Union minister Manish Tewari and Saugata Roy as members, is holding extensive consultations with financial regulators.
As statutory bodies, both RBI and SEBI report to Parliament and the panel has the parliamentary responsibility to convene the officers of these regulators on financial and economic issues of the country.
Sinha, a pass out from IIT Delhi and an MBA from Harvard Business School, was the Minister of State for Finance during the previous Modi government.