Cryptocurrency Impact on India’s Monetary Policy

Abstract

Abstract This study uses the Structural Factor Augmented VAR in exogenous variables (SFAVARx) approach to analyse the impact of cryptocurrency transactions on India’s major macroeconomic variables. Monthly data from May 2013 to October 2021 are sourced from the Reserve Bank of India and statista.com. The current form of cryptocurrency did not have a significant impact on inflation, production, the money supply, or major interest rates. However, given the increasing marginal participation in the crypto market, these important macroeconomic variables can be adversely affected in the future. The Central Bank Digital Currency (CBDC) with features related to India is being proposed as a proactive measure.