The Reserve Bank of India (RBI) has reportedly raised concerns about cryptocurrency adoption, claiming that it will lead to the “dollarization” of India’s economy.
The RBI is concerned about U.S. dollar-dominated cryptocurrencies stealing market share from the Indian rupee, according to a Monday article from the Indian edition of the Economic Times, which cited anonymous sources.
RBI officials, including Governor Shaktikanta Das, briefed the Parliamentary Standing Committee on Finance this week, according to the publication. They expressed their scepticism about cryptocurrency’s possible impact on the banking system in it. According to an unidentified official:
“Because nearly all cryptocurrencies are dollar-denominated and issued by foreign private organisations, they may eventually lead to the dollarization of a portion of our economy, which would be detrimental to the country’s sovereign interests.”
“It [crypto] will severely impede the RBI’s ability to determine monetary policy and control the country’s monetary system,” they warned.
The RBI was stated to be particularly irritated by the idea of crypto being used instead of the rupee in cross-border transactions, and the usual anti-crypto cliches of terror financing, money laundering, and drug trafficking were brought up again.
Last week, Coinbase CEO Brian Armstrong suggested that the exchange’s abrupt shutdown of its United Payments Interface (UPI) in India was due to RBI pressure.
Informal pressure from the RBI leads to disabling UPI
“So, a few days after launch, we ended up disabling UPI due to some informal pressure from the Reserve Bank of India (RBI), which is kind of the Treasury equivalent there,” he explained, adding that they were putting “soft pressure behind the scenes to try to disable some of these payments that might be going through UPI.”
Since expressing intentions to regulate the sector in December, it appears that the Indian government has chosen a suffocating approach to digital assets.
The government imposed a 30% crypto tax on digital asset holdings and transfers on April 1st, as well as various other strict taxation criteria based on gambling and lottery ticket win tax rules. Trading volume on prominent Indian crypto exchanges fell by as much as 70% in the ten days following the legislation’ implementation.