India’s Central Bank Warns Against Dollarizing the Economy with Crypto

The Reserve Bank of India (RBI), the country’s central bank, has warned that cryptocurrencies could lead to the dollarization of a part of the Indian economy.

During a briefing with India’s Parliamentary Standing Committee on Finance, top RBI officials, including Governor Shaktikanta Das, “clearly expressed their apprehensions about cryptocurrencies.”

The committee, chaired by former Minister of State for Finance Jayant Sinha, also recently questioned the Securities and Exchange Board of India (SEBI) on crypto-related issues.

India’s central bankers also noted that cryptocurrencies are used for money laundering, terrorism financing, and drug trafficking.

Moreover, they warned that cryptocurrencies could be used as a medium of exchange, replacing the rupee (INR) in both domestic and cross-border financial transactions.

The RBI officials further explained that cryptocurrency will have a negative impact on the banking system. They noted that this asset class is attractive to people who may want to invest their hard-earned savings in it, resulting in banks having less resources to lend.

The Indian government is currently working on the country’s crypto policy.

However, cryptocurrency income is already taxed at 30%. On July 1, a one percent tax deducted at source (TDS) will also start levying on crypto transactions.

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