Cryptos can lead to Dollarisation of economy: RBI officials to parliamentary panel
RBI officials in a recent meeting with the Standing Parliamentary Committee for Finance has warned that cryptocurrencies could lead to the 'dollarisation' of the Indian economy, which would be against the country’s sovereign interest. Cryptocurrencies are primarily bought and sold in US Dollars and are also issued by private institutions overseas. Dollarisation occurs when a country uses the US Dollar alongside or as a replacement for its sovereign currency. In such a setup, the dollar can become the preferred currency for pricing goods, making payments and even holding savings which might result that country giving up control of its monetary and exchange rate policies. This limits the central bank’s ability to create liquidity and stabilise the economy in times of financial or economic distress. Also, cryptocurrencies often seem like attractive investment vehicles, and people may park their money in crypto protocols (by exchanging INR for USD and then USD for crypto) - this leaves banks with less money to lend.
