RBI Reiterates Crypto Caution While Backing Blockchain Technology

The Reserve Bank of India (RBI) has reiterated its cautious stance on cryptocurrencies while expressing strong support for tokenization and distributed ledger technology. Speaking at the Kautilya Economic Conclave in New Delhi, RBI Governor Sanjay Malhotra emphasized the potential risks of crypto on monetary sovereignty, monetary policy, and capital flow, particularly in emerging economies.

Malhotra highlighted concerns over the 'singleness of money' principle, which ensures that all forms of money in the same currency can be exchanged at the same rate. He argued that the proliferation of privately issued digital assets could disrupt this system, leading to significant differences in value or backing compared to sovereign money.

The RBI has long maintained that mass adoption of crypto assets could undermine monetary policy effectiveness, weaken capital flow management, and pose risks to financial and macroeconomic stability. Malhotra also dismissed the argument that cryptocurrencies are necessary for improving payments, stating that India already has a robust infrastructure for fast, cheap, and convenient domestic payments. Instead, he identified cross-border payments as a more critical issue, suggesting that central bank digital currencies and regulated payment systems are better alternatives to crypto.

Despite his cautious remarks, Malhotra's stance is relatively mild compared to the RBI's internal position. Reports indicate that the RBI has been pushing for a national crypto policy leaning towards prohibition. Additionally, the central bank has advocated for restricting regulated banks and financial institutions from holding or trading crypto assets or private stablecoins, citing concerns over monetary sovereignty and financial activity moving outside domestic systems.