India's central bank revives push to isolate banks from crypto: Report
Infrastructure
The Reserve Bank of India (RBI) has formally advised lawmakers to implement a containment strategy that shields the domestic banking sector from exposure to private cryptocurrencies and stablecoins. During a presentation to the Parliamentary Standing Committee on Finance, RBI officials Rohit Jain and P. Vasudevan emphasized that prohibiting crypto in payments and settlements remains a viable policy option. The central bank expressed concerns that traditional regulation might inadvertently legitimize speculative assets, potentially misleading retail investors regarding their safety. Crucially, the RBI distinguished these speculative assets from regulated tokenized instruments, such as government securities and corporate bonds. By advocating for this distinction, the central bank aims to ensure that restrictive crypto policies do not stifle the growth of legitimate RWA tokenization efforts. This stance reflects a long-standing tension between the regulator and the digital asset industry, reminiscent of the 2018 banking ban that was eventually overturned by the Supreme Court in 2020. As India leads the 2025 Chainalysis Global Crypto Adoption Index, the RBI's push for a bifurcated regulatory framework highlights the government's intent to control systemic financial risks while fostering institutional blockchain innovation.
Key points
- ▸RBI officials proposed shielding banks from private crypto and stablecoins to mitigate systemic risk.
- ▸The central bank explicitly supports the continued development of tokenized government securities and bonds.
- ▸RBI warned that standard regulation of crypto could create false perceptions of investor safety.
- ▸The proposal echoes the 2018 banking restrictions later overturned by India's Supreme Court.
Background
The Reserve Bank of India is the central banking institution responsible for monetary policy and the regulation of the Indian financial system. It has historically maintained a cautious stance toward decentralized digital assets, prioritizing financial stability and the integrity of the national banking infrastructure. The bank oversees the issuance of the digital rupee (e₹), India's official central bank digital currency.
Relevance
6.5/10
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