The Reserve Bank of India has recommended a prohibition strategy for crypto assets, urging banks to remain insulated from financial risks associated with them.
New Delhi, India Jul 3, 2026 ALN: New Delhi: Top officials of the Reserve Bank of India (RBI), in a submission to a parliamentary panel, backed a containment strategy leaning towards prohibition, recommending that banks and other regulated financial institutions remain completely insulated from crypto assets and privately issued stablecoins.
RBI deputy governor Rohit Jain and executive director P Vasudevan presented submissions on behalf of the central bank to the Parliamentary Standing Committee on Finance, which is headed by BJP MP Bhartruhari Mahtab. This was the seventh meeting of the panel on virtual digital assets. So far, the panel has taken evidence from the Department of Affairs, the Financial Intelligence Unit (FIU), the Central Board of Direct Taxes (CBDT), and several private players in the virtual digital asset (VDA) sphere. "We are likely to come up with a report on it soon," Mahtab told reporters.
The RBI's stance on cryptocurrencies comes at a time when the global landscape for digital currencies is rapidly evolving. With the increasing popularity of cryptocurrencies, many countries are grappling with how to regulate them effectively. The central bank's caution reflects a broader concern about the potential risks associated with cryptocurrencies, including their use in illicit activities, market volatility, and the challenges they pose to traditional financial systems.
In a background note submitted to the panel, the RBI stated that "prohibition remains one of the recognized policy options under international standard-setting frameworks and continues to merit careful consideration." A calibrated containment strategy leaning towards prohibition would help ring-fence the financial system by preventing crypto use in payments and settlements, restricting banking sector exposure, and limiting systemic linkages, the RBI noted. This approach aligns with the central bank's ongoing efforts to ensure the stability of India's financial system amidst the growing influence of digital currencies.
The central bank cautioned that extending conventional regulatory treatment to crypto assets could inadvertently legitimize speculative products that have "no beneficial impact." It asserted that such an approach could create a "false perception of safety" among users while formalizing banking sector exposure to crypto assets. This perspective highlights the RBI's concern that treating cryptocurrencies similarly to traditional financial instruments could mislead investors regarding their risks and stability.
Therefore, the RBI recommended that banks and regulated financial institutions should not be permitted to hold, trade, or undertake exposure to crypto assets or privately issued stablecoins, arguing that such measures are necessary to insulate the financial system from potential contagion risks. The bank's recommendations reflect a cautious approach aimed at safeguarding the integrity of India's financial system while navigating the complexities of digital asset regulation.
Additionally, the RBI challenged the widely cited claim that India is the world's largest crypto adopter. It stated that the ranking, based on private blockchain analytics, is methodologically flawed and overstated adoption in populous countries. According to data cited in the note, India currently has 54 FIU-registered crypto service providers, while 3.93 crore KYC-verified users hold crypto assets worth around ₹20,436.59 crore. This assertion raises questions about the actual level of cryptocurrency adoption in India, suggesting that the perceived popularity may not align with the realities of user engagement and investment.
The RBI also sharpened its warning against stablecoins, asserting that widespread adoption could undermine India's monetary sovereignty, weaken monetary policy transmission, fragment payment systems, and pose broader financial stability risks. Citing the Bank for International Settlements (BIS) Annual Report, it stated that current stablecoin designs fall short of the foundational properties of money. This critique of stablecoins underscores the central bank's apprehension about the implications of these digital assets on traditional monetary systems and financial stability.
Instead, the RBI advocated for strengthening sovereign digital payment infrastructure through the Central Bank Digital Currency (CBDC). The introduction of a CBDC could offer a state-backed alternative to cryptocurrencies, providing a secure and regulated digital currency option for consumers and businesses alike. This initiative aligns with global trends, as many central banks explore the potential benefits of CBDCs to enhance payment systems and maintain control over monetary policy.
The RBI suggested that a significant portion of current cryptocurrency utilization appears to be associated with fraud and illicit activities, including the movement of proceeds of crimes and scams targeting technically and financially unsophisticated investors, as informed by panel sources. This concern highlights the need for robust consumer protection measures and regulatory oversight to mitigate the risks associated with cryptocurrency investments.
The note urges policymakers to clearly distinguish speculative crypto assets from tokenized real-world financial assets such as government securities and corporate bonds, ensuring that innovation in tokenization is not inadvertently constrained while framing India's crypto policy. This distinction is crucial as it allows for the exploration of innovative financial products while safeguarding against the risks posed by speculative investments in cryptocurrencies.
In conclusion, the RBI's recent submissions to the parliamentary panel reflect a cautious and measured approach towards cryptocurrencies and stablecoins. The central bank's focus on containment and prohibition highlights its commitment to preserving the stability of India's financial system while navigating the complexities of digital assets. As the global landscape for cryptocurrencies continues to evolve, the RBI's stance may influence future regulatory developments in India and potentially set a precedent for other countries grappling with similar challenges.
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