RBI warns about crypto-dollarization of the Indian economy
As per Reserve Bank of India officials, crypto “would substantially weaken the RBI’s authority to make monetary policy and govern the monetary system of the nation.”
It has been claimed that RBI officials have raised the alarm once again over the adoption of cryptocurrencies, claiming that this would lead to the “dollarization” of India’s economy.
Unnamed sources quoted in a story by the Indian edition of the Economic Times on Monday claim that the RBI is worried about the Indian rupee losing market share to cryptocurrencies controlled by the U.S. dollar.
The Parliamentary Standing Committee on Finance was briefed this week by RBI officials, including governor Shaktikanta Das, according to the journal. They were quite pessimistic about the possible impact of cryptocurrency on the financial system. As cited by an unidentified official:
Cryptocurrencies may ultimately lead to a “dollarization” of a portion of our economy that is against our national interest since they are all dollar-denominated and produced by foreign private organisations.
Crypto would substantially weaken the RBI’s ability to set monetary policy and supervise the country’s financial infrastructure, according to their report.
Anti-crypto clichés such as money laundering, terror funding, and drug trafficking have been re-emphasised in relation to the RBI’s concerns about the use of crypto in cross-border transactions.
Since last week, Coinbase CEO Brian Armstrong has suggested that the RBI was behind Coinbase’s unexpected suspension of its United Payments Interface (UPI) in India.
The Reserve Bank of India (RBI), which is India’s counterpart of the Treasury Department, used “soft pressure behind the scenes to attempt to deactivate some of these payments that would be flowing via UPI,” he said, adding that as a result, “we ended up suspending UPI a few days after introduction.”
Since expressing plans to regulate the industry in December, it seems that the Indian government has likewise adopted a less-than-welcoming stance toward digital assets.
A crypto tax of 30% on digital asset ownership and transfers was enforced by the government on April 1st, along with a number of additional strict taxation standards based on gambling and lottery ticket win tax regulations. There was a 70 percent drop in trading volume on prominent Indian crypto exchanges within 10 days of the legislation going into force.