Officials from the Reserve Bank of India (RBI) warned that, in addition to being used for terror financing, money laundering, and drug trafficking, cryptos pose a greater threat to the country’s financial system’s stability.
According to sources, top RBI officials informed a parliamentary panel that cryptocurrency might lead to the “dollarisation” of a portion of the economy, which would be detrimental to India’s national interests.
Top RBI officials, including its governor Shaktikanta Das, testified before the Parliamentary Standing Committee on Finance, which was chaired by the former minister of state for finance Jayant Sinha. They expressed their concerns about cryptocurrencies, saying they pose a threat to the financial system’s stability.
“It will seriously undermine the RBI’s capacity to determine monetary policy and regulate the monetary system of the country… 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.
Pointing out that cryptocurrencies have the potential to be a medium of exchange and replace the rupee in financial transactions, both domestic and across the 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.”
The central bank officials warned that, in addition to being used for terror financing, money laundering, and drug trafficking, cryptos pose a greater threat to the integrity of the country’s financial system.
When discussing the effects of Bitcoin (BTC), RBI officials stated that it would have a detrimental influence on the financial sector because people may put their hard-earned wealth in digital currencies, resulting in banks having fewer resources to lend.
In the Union Budget released earlier this year, Finance Minister Nirmala Sitharaman proposed a 30% tax on trading in cryptocurrencies and similar assets such as non-fungible tokens (NFTs), with 1% deducted at source (TDS) when such transactions occur.
In India, there are an estimated 15 million to 20 million crypto investors, with total crypto assets of approximately $5.34 billion. There are no official statistics on the size of the Indian crypto market.
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