India’s Central Bank Worry Cryptos Could Trigger Dollarisation of Economy: Report
Cryptocurrencies Could Lead to 'Dollarisation': RBI Officials
As per officials from India’s central bank (RBI), cryptocurrencies are dollar-denominated and also issued by foreign private entities which could lead to dollarisation.
“Almost all cryptocurrencies are dollar-denominated and issued by foreign private entities, it may eventually lead to dollarization of a part of our economy which will be against the country’s sovereign interest," the officials told the members.
They are of the opinion that cryptocurrencies have the potential to become a medium of exchange and replace the Indian rupee both in domestic and cross-border payments, thereby replacing a part of the Indian monetary system.
Countries With High Dollarisation Holds No Power
Dollarisation is a form of currency substitution, where dollars are used in addition to or instead of the local currency of a country.
Central banks of economies with high dollarisation become bodies with no power as their monetary policies will have no effect on an economy ruled by a foreign currency.
The central bank is always worried about the movement of the Indian rupee and now more than ever it is extra vigilant with high inflation, devaluation, and of course fears of possible stagflation looming large.
"It will seriously undermine the RBI's capacity to determine monetary policy and regulate the monetary system of the country," a member of the panel quoted RBI officials as saying.