The Reserve Bank of India (RBI), which has been stepping up its opposition to cryptocurrency, said that the growing asset class was a threat for its sovereign interests and would have a negative effect on the banking system.
This news comes on the heels Coinbase CEO Brian Armstrong’s blame for India’s central banks denying the Unified Payments Interface services (UPI) that caused the trading services to be halted just days after their launch last month.
Threat to Sovereign Intent
According to The Economic Times, when briefing Parliamentary Standing Committee on Finance, the RBI stated “comprehensions” about cryptocurrency. According to a source familiar with the matter, the RBI was concerned about crypto’s potential to replace rupees in cross-border and domestic transactions. It also wanted to limit the bank’s ability to “regulate money flows in the system,” as a result.
Top RBI officials also stated to parliament members that cryptocurrencies, which are mostly dollar-denominated and are issued by foreign private entities, could lead to the dollarization of a portion of its domestic economy, thereby threatening its “sovereign interests.”
It will severely undermine the RBI’s ability to regulate the country’s monetary system and determine monetary policy.”
Another concern was the financial appeal of digital assets. The bank was concerned that domestic banks might not have enough capital to finance crypto investments, as they continue to attract interest from Indian citizens.
The report stated that India has a total of 15 to 20 million crypto investors. Their holdings are estimated at $5.34 billion.
Crypto Remains in Shadow
The Indian government has been known for being hostile to the crypto industry. Brian Armstrong, Coinbase CEO, vented his frustrations at the central bank last week. He explained that the Reserve Bank of India had put “some informal pressure” on the company to suspend its services in India.
According to the CEO, the RBI-controlled NPCI had denied UPI instant retail payments services last month.
The Securities and Exchange Board of India (SEBI), India’s top watchdog, advised public figures to refrain from promoting anything that could be interpreted as a promotion of the digital asset sector. They could be held accountable for endorsements that violate applicable laws.
Featured Image Courtesy Of DW
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