RBI warns crypto can lead to dollarization of the economy

Officials of RBI have raised some apprehensions over the challenges that were posed by cryptos. They said it may cause the dollarization of one part of the economy of India. The officials voiced all concerns on 16th May in the Parliamentary Standing Committee on Finance’s meeting chaired by the Jayant Sinha, the former Minister of State for Finance. The leading RBI officials such as Shaktikanta Das, the governor warned that cryptos may reduce the potential of the RBI for determining and regulating monetary policy and the country’s monetary system. They even said that cryptocurrency assets can be a huge challenge to the country’s financial system’s stability, visit website: https://bitcoin-up.live/

What did RBI highlight?

Many repercussions along with threats to the market of crypto were highlighted by the committee to the economy of India and the system of banking. These are:

  • Bank officials mentioned that after the majority of the cryptos got dollar denominated or foreign private entities issued them, it may be causing dollarization of one part of the Indian economy that will get detrimental to the sovereign interest of the country.
  • Further, they asserted that people may be finding cryptocurrency asset classes very alluring.
  • People may wish to invest all hard-earned savings in crypto. Anyone can invest in cryptocurrencies and earn a fortune thanks to the friendly crypto trading platform Bitcoin smart.
  • This may cause a decrease in resources for banks to lend.
  • It can create a negative effect on the system of banking.
  • The committee too questioned the SEBI on issues that were cryptocurrency-related.
  • RBI officials also said that one such threat of the crypto is that one can use it for illegal activities such as money laundering, drug trafficking, and terrorism financing.
  • They also warned that crypto can get used as an exchange medium.
  • It can replace the rupee in not only domestic financial transactions but also in cross-border ones in the future.
  • There is not any official data on the total number of crypto users or investors in the country.
  • But as per an estimate, approximately 15-20 million cryptocurrency investors in the country are having a total holding of nearly $5.34 billion in crypto.
  • This was reported by Forbes India.
  • Crypto income got taxed by the government in India at 30 % and put a 1%TDS on any payment for crypto-asset transfer over some specific threshold.

Conclusion

This month, this is the second time that RBI expressed anti-cryptocurrency action with the CEO of Coinbase, Brian Armstrong. They suggested that last week the sudden stoppage of UPI in the country by the exchange was because of the RBI’s pressure. So after launching it, they disabled it after some days due to the informal pressure from the RBI. RBI applies soft pressure behind all scenes in an attempt of disabling such payments that may be happening through UPI. It looks like the government of India is not favorably looking at digital assets now. They took a strict approach to cryptocurrency outlining intentions of regulating this sector in December. On 1st April government of India implemented a 30 % tax on holdings as well as transfers of digital assets and many other strict guidelines of taxation. They were gambling along with the win of lottery tickets rules-based. After a few days of this law becoming effective, the volume of trading on leading crypto exchanges in India fell as much as 70 %.

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