RBI Maintains Crypto Caution but Embraces Blockchain and Tokenization

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. While the RBI remains wary of crypto due to risks around monetary policy, monetary sovereignty, and capital flows, it has expressed strong support for blockchain technology and tokenization. The central bank is actively using these technologies internally and through public-private partnerships.

Malhotra emphasized the importance of maintaining the 'singleness of money' to ensure monetary policy effectiveness, particularly in emerging markets with capital flow restrictions. He also questioned the necessity of private cryptocurrencies for domestic payments, highlighting India’s existing efficient and low-cost payment infrastructure. The RBI Governor believes cross-border payments present a more significant challenge but can be addressed through central bank digital currencies (CBDCs).

The RBI has previously recommended a complete ban on cryptocurrencies, arguing that regulating them under conventional financial laws could create a false sense of security. Despite this stance, crypto platforms in India must comply with 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 advancing its digital rupee program, exploring use cases such as targeted government transfers and CBDC-based trade settlement infrastructure with Russia. The central bank is also studying tokenized certificates of deposit and corporate bonds settled using the wholesale digital rupee. Additionally, the Securities and Exchange Board of India (SEBI) launched the Demat 2.0 pilot for tokenized corporate bonds on September 10.