RBI pushes crypto containment as India weighs 2 policy paths — India's central bank told a parliamentary panel that private crypto and stablecoins should stay outside the formal banking system, while tokenized government securities and CBDCs get regulatory support.
The Reserve Bank of India urged lawmakers to keep banks and regulated financial institutions completely insulated from crypto and privately issued stablecoins, reviving a containment approach that the country's Supreme Court struck down six years ago.
RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented the central bank's position to the Parliamentary Standing Committee on Finance on July 2, according to a report by The Economic Times. In a background note submitted to the panel, the RBI recommended a "calibrated containment strategy leaning toward prohibition" that would prevent any bank exposure through payments, settlements or balance sheets.
"The RBI's preferred framework would prevent the use of crypto in payments and settlements while restricting banking-sector exposure," Jain told the panel, according to the report. The central bank warned that applying traditional regulation to crypto could legitimize speculative assets and create a false perception of safety among users, the note said.
The approach mirrors the RBI's 2018 circular, which directed regulated financial institutions to stop dealing in crypto or providing services to individuals and businesses involved in them. That directive effectively cut off crypto exchanges from India's banking system without prohibiting individuals from owning or trading crypto. India's Supreme Court overturned the circular in March 2020, ruling that the measure failed the test of proportionality because the central bank had not shown harm suffered by entities it regulated.
The containment vs. tokenization divide
The RBI drew a sharp line between private crypto assets and regulated tokenization. The central bank urged policymakers to distinguish crypto from tokenized government securities, corporate bonds and other regulated financial instruments so that restrictions would not hinder tokenization pilots already underway. India is currently running pilots for both wholesale and retail versions of the e-rupee, its central bank digital currency, alongside commercial banks experimenting with tokenized deposits.
Deputy Governor T Rabi Sankar argued in December 2025 that stablecoins do not offer unique advantages compared with fiat currencies or CBDCs and could pose "substantial risks to monetary stability and systemic resilience," according to previous reports.
The Institute of Chartered Accountants of India presented a contrasting view at the same meeting, supporting a comprehensive legal framework for virtual digital assets instead of a complete rejection. ICAI said it is ready to help the government prepare a principle-based regulatory framework with practical implementation guidelines.
What's at stake for the world's largest crypto market
India ranked first in Chainalysis' 2025 Global Crypto Adoption Index, although the RBI reportedly challenged the methodology behind private-sector adoption rankings. Approximately 11.9 million people in the country own or trade crypto assets, according to available data, even though no specific regulations govern the sector.
India already imposes a 30% tax on crypto gains with no offset for losses, plus a 1% tax deducted at source on transactions. Without banking rails, exchanges and DeFi platforms face constant friction in on-ramps and off-ramps. If one of the world's largest economies refuses to integrate private stablecoins into its financial system, it strengthens the hand of other central banks arguing for similar restrictions.
Committee Chairman Bhartruhari Mahtab confirmed that the parliamentary panel is reviewing existing VDA-related provisions under the Income Tax Act and is expected to hold more consultations before submitting its recommendations. The RBI's latest push comes as India's crypto users continue to grow despite the absence of a clear legal framework, leaving the central bank's preferred containment strategy at odds with on-the-ground adoption.
This article is for informational purposes only and does not constitute investment advice.
