India’s RBI Revives Push To Keep Banks Away From Crypto Assets

TLDR

• The RBI reportedly urged lawmakers to limit bank exposure to crypto and private stablecoins.
• The central bank said prohibition remains a recognized policy option for digital assets.
• The RBI warned that traditional crypto regulation could create a false sense of safety.
• India’s Supreme Court overturned the RBI’s 2018 crypto banking circular in March 2020.
• The RBI asked policymakers to separate crypto from regulated tokenized financial instruments.

India’s central bank has renewed its case for keeping banks away from crypto. The Reserve Bank of India urged lawmakers to limit exposure to digital assets and stablecoins. The position came as Parliament prepares a report on digital asset policy.

RBI Presses For A Containment Strategy

RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan briefed the finance panel on Thursday. They presented the central bank’s view before the Parliamentary Standing Committee on Finance. The Economic Times reported this, citing people aware of the discussions.

In a background note, the RBI said prohibition remained a recognized policy option. It also backed limits on crypto use in payments and settlements. Therefore, India could separate digital assets from banking channels again.

India Weighs Crypto Rules After Court Setback

The proposal echoes the RBI’s 2018 banking restriction on crypto activity. That order barred regulated financial institutions from serving crypto exchanges and related businesses. As a result, India blocked banking access without banning individual trading.

The Supreme Court overturned the circular in March 2020 after exchanges challenged it. The court accepted the RBI’s preventive powers but questioned proportionality. It said the bank had not shown harm to regulated entities.

Tokenization Debate Shapes India Policy Review

The RBI argued that normal regulation may give speculative assets a safer image. It warned that rules could create a “false perception of safety” among users. However, it urged officials to separate crypto from regulated tokenized instruments.

India’s central bank asked policymakers not to block regulated tokenization. It cited tokenized government securities, corporate bonds, and similar financial products. This distinction may shape India’s final policy report.

India ranked first in Chainalysis’ 2025 Global Crypto Adoption Index. However, the RBI challenged the methodology behind private adoption rankings. For now, India faces renewed pressure to keep banks insulated from crypto.

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