Top officials of the Reserve bank of India (RBI) have told a parliamentary panel that cryptocurrency might lead to the "dollarization" of a part of the economy, which would be detrimental to India's national interests.

The RBI officials, including governor Shaktikanta Das, briefed the Parliamentary Standing Committee on Finance, chaired by former minister of state for finance Jayant Sinha, on their concerns about cryptocurrencies and how they threaten the financial system's stability, source said.

"It will severely erode the RBI's ability to determine monetary policy and control the country's monetary system," one panel member said. Central bank officials noted that cryptocurrencies have the potential to be a medium of exchange and to replace the rupee in domestic and cross-border financial transactions, saying that these currencies "can replace a part of the monetary system" and "undermine the RBI's capacity to regulate the flow of money in the system." Cryptocurrencies pose a greater danger to the country's financial system's stability.

Central bank officials noted that cryptocurrencies have the potential to be a medium of exchange and to replace the rupee in domestic and cross-border financial transactions, saying that these currencies "can replace a part of the monetary system" and "undermine the RBI's capacity to regulate the flow of money in the system."

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