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Cryptocurrencies Can Become A Major Threat To Stability Of Country's Financial System, Warns RBI

Reserve Bank Governor Shaktikanta Das, presented their views before the Parliamentary Standing Committee on Finance headed by former Minister of State for Finance Jayant Sinha

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Top officials of the Reserve Bank of India have told a parliamentary committee that cryptocurrency could lead to dollarisation of a part of the economy, which would be against India's sovereign interests. Central bank officials said these cryptocurrencies could occupy a part of the monetary system and could also undermine the RBI's ability to regulate the flow of money in the system.

The news agency PTI reported that top officials, including Reserve Bank Governor Shaktikanta Das, presented their views before the Parliamentary Standing Committee on Finance headed by former Minister of State for Finance Jayant Sinha. He apprised them of his apprehensions regarding the cryptocurrency and said that it would pose challenges to the stability of the financial system.

According to a member of the committee, RBI officials said this would seriously undermine the central bank's ability to set monetary policy and regulate the country's monetary system. He said that cryptocurrencies have the potential to become a medium of exchange and can replace the rupee in financial transactions both domestically and cross-border.

Reserve Bank officials warned that cryptocurrencies can also be used for terror financing, money laundering and drug trafficking, and not only this, it can become a major threat to the stability of the country's financial system. He told the parliamentary committee that almost all cryptocurrencies are dollar-based and issued by foreign private institutions. In such a situation, it is possible that this may lead to dollarisation of some part of our economy, which will be against the sovereign interests of the country.

Officials said cryptocurrencies will also have a negative impact on the banking system, as being lucrative assets, people may invest their hard earned money in them, resulting in a lack of resources for banks to provide. In this year's budget, Finance Minister Nirmala Sitharaman had announced a 30 per cent tax on trading in cryptocurrencies and related assets.

According to an estimate, the number of people investing in crypto in the country is between 15 and 20 million, who have about USD 5.34 billion in crypto currency. There is no official data available about the size of the crypto market in India. This parliamentary committee is holding extensive consultations with the finance regulators.


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