Former Reserve Bank of India Governor Duvvuri Subbarao said the central bank could lose control over money supply and inflation management if cryptocurrency is allowed in the country. Speaking at a webinar hosted by the National Stock Exchange (NSE) and the Stern School of Business at New York University (NYU), Rao also said India’s case for the Issuing a central bank digital currency (CBDC) might not be sound because there are capital controls.
“Crypto is backed by algorithms and there are concerns that the central bank may lose control of the money supply and management of inflation. There are also concerns that crypto may disrupt monetary policy,” he said. declared Wednesday.
“Crypto can bypass capital controls; fiat currency is tied to reserve currency,” he added.
Rao, who served as RBI governor from 2008 to 2013, said the CBDC also needed strong data protection laws.
According to him, cash is disappearing in India and digital payments are becoming popular.
However, Rao said, due to the pandemic, currency circulation increased as people held onto money due to lockdowns. “The role of the central bank as a lender of last resort should not be hampered.”