India’s Central Bank Worry Cryptos Could Trigger Dollarisation of Economy: Report

Top officials from India’s central bank (RBI) told a parliamentary committee on finance that cryptocurrencies could lead to the “dollarisation” of a part of the economy, which would be against the country’s sovereign interest, according to a local media 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 infla...