RBI Backs Tokenization, but Remains Cautious on Privately Issued Cryptos

The Reserve Bank of India (RBI) has expressed support for tokenization technology while maintaining caution on privately issued cryptocurrencies. Governor Sanjay Malhotra stated that the RBI backs new technologies that can make the financial system more efficient, but remains cautious about widespread crypto adoption.

Malhotra tied the RBI's caution to the 'singleness of money', highlighting concerns over monetary sovereignty and capital flows in emerging economies with restrictions on capital movements. He emphasized that existing domestic payments are fast, cheap, and convenient, but cross-border payments remain a more difficult problem where other solutions, including central bank digital currencies, can be explored.

The RBI's position is not a blanket rejection of digital money, but rather a nuanced approach to the benefits of tokenization. The governor stated that tokenization can improve efficiency without necessarily creating freely traded cryptocurrencies. Foreign-currency stablecoins are at the center of the RBI's concern, with Malhotra warning about the risk of mass adoption pulling financial activity away from domestic banking and currency systems.