Former Reserve Bank of India Governor Duvvuri Subbarao has said the central bank could lose control over money supply and inflation management if cryptocurrency is allowed in the country. He also said India’s case for issuing a central bank digital currency (CBDC) may not be strong as there are capital controls.
He mentioned ‘Crypto is backed by algorithms and there is fear that the central bank might lose control over money supply and inflation management. There are also concerns that crypto will disrupt the monetary policy.’
Further, he stated CBDC also needs robust data protection laws. According to him cash is on its way out in India and digital payments are becoming popular. However, He said owing to the pandemic, currency circulation has increased as people held on to cash due to lockdowns. The central bank’s role as last-resort lender should not be hampered.
