RBI Governor Supports Blockchain but Maintains Caution on Cryptocurrencies

Reserve Bank of India (RBI) Governor Sanjay Malhotra reaffirmed the country’s cautious stance on cryptocurrencies during the Kautilya Economic Conclave in New Delhi on October 3. He cited concerns over monetary policy, sovereignty, and capital flows as key reasons for the RBI’s reluctance to fully embrace crypto. Despite this, Malhotra expressed strong support for blockchain technology and tokenization, noting that the RBI has integrated these technologies into its operations and public-private partnerships.

Malhotra emphasized the importance of maintaining the 'singleness of money' and questioned the necessity of private cryptocurrencies for domestic payments, given India’s efficient and low-cost payment infrastructure. He suggested that cross-border payments present a more significant challenge, which could be addressed through central bank digital currencies (CBDCs). The RBI is actively advancing its digital rupee program, exploring use cases such as targeted government transfers and international trade settlements.

The RBI has previously recommended a complete ban on cryptocurrencies, arguing that regulation under conventional financial laws could create a false sense of security. However, crypto platforms currently operate under existing tax and anti-money laundering (AML) laws. The Financial Intelligence Unit (FIU) has issued notices to 15 firms for violating AML compliance requirements. Meanwhile, the RBI is pushing ahead with tokenization projects, including tokenized certificates of deposit and corporate bonds.

Malhotra also addressed broader economic concerns, warning about rising bond yields and public debt due to increased government and private spending. He cautioned that global interest rates could impact India’s domestic financial stability and urged vigilance against emerging vulnerabilities in the financial system.