Parts of the Indian economy can lead to “dollarization” due to cryptocurrencies, which would be against the national interest, top officials of the Reserve Bank of India (RBI) told a parliamentary panel, according to local media.
See related article: India’s financial stability at risk from cryptos: IMF
Fast facts
- Local media quoted unnamed officials in the RBI who briefed the Parliamentary Standing Committee on Finance, about apprehensions regarding cryptocurrencies.
- The central bank told the committee that almost all cryptocurrencies are dollar-denominated and issued by foreign private entities, which may eventually dollarize a segment of the Indian economy.
- They said that cryptocurrencies could be a medium of exchange and replace the rupee in financial transactions, both in domestic and cross-border transactions, affecting the monetary system and undermining the RBI’s capacity to regulate capital flow.
- The fate of cryptocurrencies has recently come into question in light of the cryptocurrency crash led by the de-pegging of Terra’s algorithmic stablecoin UST.
- Cryptocurrencies threaten the decreased resources for banks to lend, as digital assets attract investors to pledge personal funds, the RBI officials reportedly said.
- The RBI has taken a consistent stance against investing in cryptocurrencies, with a deputy governor even calling for an outright ban.
See related article: India FM: RBI to issue blockchain-based digital rupee
