Dollarization, it is well understood, would undermine the ability of authorities to control money supply or interest rates, as monetary policy would not have any impact on the non-Rupee currencies or payment instruments. When that happens, India loses not just its currency, a defining feature of its sovereignty, but its policy control of the economy.
With loss of traction for monetary policy, the ability to control inflation would be materially weakened. 21. Given a choice, people may like to hold at least a part of their deposits in convertible currencies like the US Dollar or Euro. Cryptocurrencies priced in these convertible currencies would provide such an opportunity.