India’s RBI stays cautious on crypto, backs tokenization
RWA Signal Insight
InfrastructureThe Reserve Bank of India (RBI) continues to maintain a strict regulatory divide between private cryptocurrencies and institutional tokenization efforts. RBI Governor Sanjay Malhotra emphasized that while the central bank remains cautious toward private digital assets due to risks regarding monetary sovereignty and capital flow management, it actively promotes distributed ledger technology and tokenization for regulated financial instruments. The RBI is currently advancing projects involving programmable central bank digital currencies (CBDCs), tokenized certificates of deposit, and corporate bonds settled via the wholesale digital rupee. Notably, the Securities and Exchange Board of India (SEBI) recently launched the Demat 2.0 pilot, which successfully utilized DLT for securities records while settling cash legs through central bank money. Recent tokenized bond issuances by REC, Larsen & Toubro, and IIFL totaled ₹1,025 crore, demonstrating the practical application of these technologies within India's existing legal framework. This dual-track approach allows the government to leverage blockchain for financial efficiency and settlement finality while simultaneously enforcing anti-money laundering regulations on offshore crypto platforms. By prioritizing the 'singleness of money,' the RBI aims to integrate tokenized assets into the sovereign financial system rather than allowing private alternatives to disrupt domestic monetary policy.
Key points
- RBI Governor Sanjay Malhotra confirmed continued support for tokenization and DLT despite crypto caution.
- SEBI's Demat 2.0 pilot successfully settled tokenized corporate bonds using wholesale CBDC infrastructure.
- Three Indian firms, REC, Larsen & Toubro, and IIFL, issued ₹1,025 crore in tokenized bonds.
- FIU-IND issued compliance notices to 15 offshore crypto platforms for failing to register locally.
Background
The Reserve Bank of India (RBI) is the central banking institution responsible for managing India's monetary policy and currency issuance. It has been a global leader in exploring Central Bank Digital Currencies (CBDCs), specifically the digital rupee, which is designed to function as a sovereign digital equivalent to physical cash. The RBI distinguishes between speculative private cryptocurrencies and regulated tokenized assets, which it views as tools to enhance settlement efficiency and financial transparency.