Cryptocurrency to pose a threat of Currency Substitution in the Indian Economy
Cryptocurrencies are a potential threat to the nation’s financial stability. Crypto can replace the rupee in both domestic and cross border financial transactions.
Central bank authorities are of the conclusion that cryptocurrencies can weaken the monetary policy, especially weakening RBI’s capacity to control the money supply in the economy.
Apart from that, crypto is proactively used in the area of racketeering such as drug deals, tax evasion, money laundering, terror funding, etc. which certainly poses a bigger danger to the integrity of the financial stability.
According to unofficial sources, the Indian Crypto market has around 20 million crypto investors with an average crypto holding of what is estimated to be $5 billion.
Central bank officials have also said, bank rate systems may fail to work, owing to the attractive assets offered by cryptocurrencies.
People may invest all their funds into these. Because of this banks will have fewer depositors causing a severe deficit of resources to lend as loans, etc.
It has been dawned on the Parliamentary Panel by top RBI officials that cryptos will eventually lead the national currency to be replaced by U.S dollars which would be detrimental to the country’s sovereignty.
Top RBI officials including governor Shaktikanta Das, told the Parliamentary Standing Committee on Finance that cryptocurrencies being dollar-denominated assets issued by foreign entities will lead to part of the economy being “dollarized”.
1% TDS on transactions is excessive and should be reduced: demands the crypto industry.
Meanwhile, the crypto sector has petitioned the government to cut the TDS on payments for gains originating from cryptocurrency trading.
They want the government to cut the TDS from the projected 1% to 0.01 or 0.05 percent, claiming that otherwise, it will harm retailers.
Sumit Gupta, CEO and co-founder of CoinDCX said in an interview, “We have put together a presentation to the government on how 30% tax on income from cryptocurrencies and 1% TDS will lock up funds and drain market liquidity which is detrimental to the sector and the retail investors.”
Former GST council chairman Sushil Modi, former Union Ministers Manish Tewari, and Saugata Roy are among the members of the Sinha-led team, which has been conducting extensive discussions with banking regulators.
Both the RBI and the SEBI are statutory entities that report to Parliament, and the panel is to summon officials from both agencies to discuss the country's financial and economic challenges.
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