The RBI authorities indicated that bitcoin will have a detrimental influence on the country’s financial sector while considering its consequences. While cryptocurrencies have the potential to replace the rupee as a medium of exchange in domestic and cross-border financial transactions, the RBI’s capacity to oversee the flow of money will be jeopardized, according to central bank officials.
Top Reserve Bank of India (RBI) officials are said to have informed a parliamentary panel that cryptocurrencies might lead to the “dollarization” of a section of the economy, which would be bad for India’s national interests.
Top RBI officials, including governor Shaktikanta Das, testified before the Parliamentary Standing Committee on Finance, which is led by former finance minister Jayant Sinha.They emphasized their reservations about cryptocurrencies, claiming that they represent a risk to the financial system’s stability.
While cryptocurrencies have the potential to replace the rupee as a medium of exchange in domestic and cross-border financial transactions, the RBI’s capacity to oversee the flow of money in the system will be jeopardized, according to central bank officials.
Officials also stated that while cryptocurrencies have the potential to replace the rupee as a medium of exchange in domestic and cross-border financial transactions, they will jeopardize the RBI’s capacity to govern the flow of money through the system. “Almost all cryptocurrencies are dollar-denominated and issued by foreign private organizations,” they warned the members, “which may eventually lead to the dollarization of a sector of our economy, which is against the country’s national interest.”
The RBI authorities warned that cryptocurrencies will have a detrimental influence on the financial sector because individuals may invest their hard-earned funds in digital currencies, resulting in banks having less resources to lend.
Finance Minister Nirmala Sitharaman suggested a 30% tax on trading in cryptocurrencies and similar assets such as non-fungible tokens (NFTs) in the Union Budget earlier this year, with 1% deducted at source (TDS) when such transactions occur. There are an estimated 15 million to 20 million crypto investors in India, with $5.34 billion in total crypto holdings.
Former GST council chairman Sushil Modi, as well as former Union Ministers Manish Tewari and Saugata Roy, have been meeting with banking regulators as part of the Sinha-led group.
The RBI and SEBI are both statutory authorities that must report to Parliament, and the panel has the parliamentary power to call officials from these agencies to address the country’s financial and economic challenges.
However, in the middle of the pioneering fintech revolution, the Union Support Minister stated last month that the main risk of cryptocurrencies is money laundering and its use to finance terrorists, and that the only solution is to regulate using technology. She added at the time, during a session at the IMF’s spring conference, that technology-based regulation is the only way to deal with cryptocurrencies, and that it must be “so proficient” that it is “not behind the curve, but on top of it.”