India's central bank has renewed its push to keep the country's banking system insulated from cryptocurrencies and privately issued stablecoins. In a presentation before the Parliamentary Standing Committee on Finance, Reserve Bank of India (RBI) Deputy Governor Rohit Jain and Executive Director P. Vasudevan argued for a containment strategy that would bar regulated financial institutions from holding, trading, or taking exposure to digital assets.
The RBI emphasized that prohibition remains a recognized policy option under global frameworks, and it urged lawmakers to prevent crypto from being used in payments and settlements. The central bank warned that granting conventional regulatory recognition to speculative crypto assets could create a misleading sense of safety and legitimize products with no clear economic benefit.
Stablecoins and contagion risks. The RBI singled out privately issued stablecoins as a threat to monetary control, policy transmission, and financial stability. It argued that keeping such instruments outside regulated financial channels would reduce contagion risks across the wider system. The call echoes the central bank's 2018 circular that effectively cut crypto businesses off from banking services—a measure struck down by the Supreme Court in 2020 for being disproportionate, after which the RBI clarified that banks could no longer rely on the invalidated directive.
Distinction for tokenized securities. While seeking strict barriers for crypto, the RBI asked policymakers to differentiate tokenized government securities, corporate bonds, and other regulated financial instruments. This would allow tokenization initiatives to proceed without being hampered by crypto-related restrictions. The committee, led by BJP MP Bhartruhari Mahtab, is reviewing India's overall approach to virtual digital assets amid broader regulatory tightening—such as the Financial Intelligence Unit's recent directive to preserve records of OTC crypto transactions above $10,000 and enhanced KYC checks including live selfies and geolocation.
