RBI renews push to shield banks from crypto risks

The RBI urges lawmakers to keep banks insulated from cryptocurrencies and stablecoins, warning of financial risks while supporting innovation in regulated tokenized assets.

The Reserve Bank of India (RBI) has renewed its efforts to insulate banks and regulated financial institutions from cryptocurrencies and privately issued stablecoins. In recent presentations to the Parliamentary Standing Committee on Finance, RBI officials advocated for a containment strategy that would prevent banks from holding, trading, or having any exposure to crypto assets, including through payments and settlements. The RBI emphasized that prohibition remains a valid policy option, warning that regulating crypto under traditional financial frameworks could legitimize speculative assets and create a false sense of security. The central bank highlighted risks such as money laundering, illegal activities, and threats to monetary and payment system stability, particularly from stablecoins. However, the RBI distinguished between unregulated cryptocurrencies and regulated tokenized financial instruments, such as government securities and corporate bonds. The central bank urged lawmakers not to hinder innovation in tokenization. This ongoing policy debate follows a 2020 Supreme Court decision and is part of India’s broader review of digital asset regulation.