Cryptocurrencies can result in dollarisation of economic system: RBI officers to parliamentary panel

By PTI

NEW DELHI: Cryptocurrencies can result in “dollarisation” of part of the economic system which might be towards India’s sovereign curiosity, high officers of the RBI have informed a parliamentary panel, in line with sources.

Briefing the Parliamentary Standing Committee on Finance chaired by former minister of state for finance Jayant Sinha, high officers of the RBI, together with its governor Shaktikanta Das, clearly expressed their apprehensions about cryptocurrencies and mentioned these pose challenges to the steadiness of the monetary system, sources informed PTI.

“It will seriously undermine the RBI’s capacity to determine monetary policy and regulate the monetary system of the country,” a member of the panel quoted RBI officers as saying.

Pointing out that cryptocurrencies have the potential to be a medium of change and change the rupee in monetary transactions each home and cross border, central financial institution officers mentioned 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”.

Cautioning that moreover getting used for terror financing, cash laundering and drug trafficking, cryptos pose an even bigger menace to the steadiness of the monetary system of the nation, the central financial institution officers mentioned.

“Almost all cryptocurrencies are dollar-denominated and issued by foreign private entities, it may eventually lead to dollarization of a part of our economy which will be against the country’s sovereign interest,” the officers informed the members.

Discussing the impacts of cryptocurrency, the RBI officers mentioned it would even have a damaging influence on the banking system as these being engaging belongings individuals might make investments their hard-earned financial savings in these currencies which can end in banks having lesser sources to lend.

In Union Budget introduced earlier this 12 months, Finance Minister Nirmala Sitharaman launched a tax on buying and selling in cryptocurrencies and associated belongings like non-fungible tokens (NFTs) at a flat 30 per cent and one per cent of tax will likely be deducted at supply (TDS) when any such transaction takes place.

There are an estimated 15 million to twenty million crypto buyers in India, with complete crypto holdings of round USD 5.34 billion.

No official information is on the market on the scale of the Indian crypto market.

The Sinha-led panel which has former GST council head Sushil Modi, former Union Ministers Manish Tewari and Saugata Roy as its members have been holding complete deliberations with monetary regulators.

As statutory our bodies, each RBI and SEBI report back to Parliament and the panel has the parliamentary accountability to name upon the officers of those regulators over the monetary and financial problems with the nation.

Sinha, a move out of IIT Delhi and MBA from Harvard Business School, was the Minister of State for Finance throughout the earlier Modi authorities.