India Warns against a Crypto Dollarized Financial Sector
The Reserve Bank of India (RBI) said that digital asset would impair the ability of the country to supervise its economic system and establish financial policies. The supervising bank’s officials issued warnings one more time over the utility of digital assets. The RBI’s officials alleged that adopting virtual assets would “dollarize” the country’s financial system, to the detriment of the local economy.
Information from a local news report says that some officials in the RBI are concerned about virtual currencies based on the US Dollar. They are worried that these USD-based assets could take away significant market share from the fiat currency.
The report observed that the institution’s officials, including the bank’s leader, briefed a national legislative committee during the week. The officials reportedly expressed intensive skepticism against the possible effects of digital assets on the nation’s economy.
According to an unnamed officer in the RBI, the threat of a “dollarized” economy could undermine India’s sovereign interests over its internal affairs. Additionally, the said officer also said that digital assets could overshadow the potential of the governing bank to set up financial policies and supervise its financial sector.
Stiffening Cryptocurrency Regulations
The reports further showed that the RBI has been exasperated about the idea of utilizing digital assets in making international transfers of assets, instead of the fiat currency. Additionally, the supervisory institution highlighted the negative potential of drug traffickers, money launderers and terrorists to utilize digital assets in propelling their activities.
The latest report from India makes it the second information in May about anti-digital assets sentiments of the Asian nation. Last week, the Chief Executive of Coinbase, Brian Armstrong, said that his organization stopped a sub-division of its digital assets’ activities in India over subtle pressure from the supervising financial institution.
The country outlined plans to introduce regulations on the digital assets industry in December. India has reportedly continued to assume a strangulating approach to the digital assets industry since then, with recent unfavorable stances against the emerging market.
For instance, on the first of April, the Indian government instituted a 30% tax on digital asset savings and transactions. It also issued several other strict taxation regulations that formerly applied to gambling and lottery activities within the nation. Less than two weeks after implementing the April cryptocurrency regulations, the trading volume on major digital assets’ marketplaces in India reportedly fell by 70%.
Last month, the county’s Finance Minister, Nirmala Sitharaman, informed panelists at an IMF event about the need for a worldwide cryptocurrency regulation to control the utility of digital assets in financing illegal operations. During the April event, Sitharaman asked global leaders to collaborate in formulating regulations to reduce the risks of utilizing cryptocurrency in financing terrorism and money laundering activities.
However, while government leaders globally continue to speak about the usage of digital assets in financing illegal operations, a report from Chainalysis says that the utilization of crypto for illegal operations has continued to fall. The report says that the reasons for the reduction are the heightened complexity to transfer illicit money and the ease for security officials to track crypto transfers, compared to fiat money.