Top officials of the Reserve Bank of India (RBI), while speaking before a parliamentary committee, supported the strategy of banning or completely excluding crypto assets and privately issued stablecoins. He suggested that banks and other regulated financial institutions should be completely kept away from crypto assets and private stablecoins. RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented their views on behalf of the Central Bank before the Parliamentary Standing Committee (Finance) headed by BJP MP Bhartrihari Mahtab. This was the seventh meeting of the Committee on Virtual Digital Assets. So far, the committee has taken information and evidence from the Department of Economic Affairs, FIU, CBDT and several private companies in the VDA sector. Mahtab said in the ET report that we are going to bring a report on this soon.
RBI on crypto
In a background note submitted to the committee, the RBI said that “imposing a moratorium is a recognized policy option under the international standard-setting framework and should be seriously considered. A measured strategy leaning towards a moratorium will help safeguard the financial system. This will prevent the use of crypto in payments and settlements, limit exposure to the banking sector and reduce systemic risks,” the RBI said.
RBI warning
The central bank warned that applying traditional regulatory rules to crypto assets could inadvertently validate speculative-based products that have “no economic benefit.” He said such an approach could create a “false illusion of security” in the minds of users, while formally increasing the banking sector’s exposure to crypto assets. Therefore, it suggested that banks and regulated financial institutions should not be allowed to hold, trade or engage in crypto assets or private stablecoins. His argument is that such steps are necessary to protect the financial system from potentially major risks.
India’s ranking on crypto is wrong
RBI also challenged the common claim that India is the largest crypto adopter in the world. He said that this ranking, based on private blockchain analytics, is methodologically flawed and overstates the number of crypto adopters in more populous countries. According to the data given in the note, there are currently 54 FIU-registered crypto service providers in India, while 3.93 crore KYC-verified users hold crypto assets worth about Rs 20,436.59 crore.
These losses can occur
RBI has also tightened its warning against stablecoins. He said that if these are adopted on a large scale, it could harm India’s monetary sovereignty, weaken the effectiveness of monetary policy, fragment the payment system and create risks to broader financial stability. Citing the annual economic report of BIS, it has been said that the current stablecoin designs do not meet the basic characteristics of money.
RBI’s advice to the panel
Instead, it advocated strengthening sovereign digital payment infrastructure through a central bank digital currency. Sources in the panel said in the ET report that the RBI believes that a large part of the current use of cryptocurrencies is related to fraud and illegal activities, including the transfer of proceeds of crime and scams and targeting investors with less technical and financial knowledge. The note asks policymakers to make a clear distinction between speculative-based crypto assets and tokenized real-world financial assets (such as government securities, corporate bonds and other regulated financial instruments) so that innovation in tokenization is not inadvertently hindered when formulating India’s crypto policy.
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