“Cryptocurrencies can lead to dollarization of developing countries like India as the prices of crypto tokens are mostly in dollars,” the RBI chief said.
He said this would lead to serious financial instability in the country. The RBI governor also said that crypto poses a serious risk to small investors, who are likely to lose their money.
“If I’m sitting in another part of the world it might benefit me, but not here,” he said. “It will work in favor of an advanced economy,” he said.
Das’s remarks come as no surprise as RBI has always been a vocal critic of crypto assets.
The comments come at a time when crypto prices have embraced volatility again. The prices of major crypto tokens have fallen by as much as 20 percent in the past five sessions.
The global crypto market capitalization was barely above the $1 trillion mark and bitcoin has been at the $21,000 level recently. However, altcoins have taken a sharp beat on renewed inflation concerns.
The RBI governor briefly expressed happiness over the fact that a large number of people have taken seriously the top lender’s warnings on crypto.
However, he emphasized that cryptocurrencies can cause a lot of financial instability in terms of monetary policy, the ability to determine the Indian currency’s exchange rate, capital flows and the stability of the banking sector.
Das flagged his concerns over the use of crypto assets as a potential tool for money laundering and illegal transfer of funds, which could dent the financial economy of the country.
However, he supported blockchain technology and said that the technology has various applications and use cases and many of them are already being used.
In June 2022, Das stated that there are clear dangers to crypto and that one should beware of the emerging risk on the horizon. “Anything that acquires value based on belief, without any underlying, under a sophisticated name is just speculation,” he said.
India will also launch its own central bank digital currency (CBDC). CBDC is a legal tender issued by a central bank in a digital form. It is similar to fiat currency and is exchangeable one-to-one with fiat currency.
Finance Minister Nirmala Sitharaman announced this while presenting the Union Budget in Parliament on February 1, 2022, where she called it the ‘Digital Rupee’ and announced the launch in the current financial year.
CBDC is a digital form of the national currency, and therefore will not be prone to volatile price fluctuations like other cryptos such as Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE), and others.
In India, crypto is considered a virtual digital asset (VDA) and faces a 30 percent tax on all gains. One percent TDS has also been levied.