RBI Knocks on Crypto's Bank Account Door Again, This Time With a Bigger Megaphone 🏦

The Reserve Bank of India has renewed its push to wall off banks and other regulated financial institutions from crypto and privately issued stablecoins, according to a report by The Economic Times, as lawmakers prepare a report on India's digital asset policy. RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan laid out the central bank's position to the Parliamentary Standing Committee on Finance on Thursday, signaling a renewed containment strategy that echoes the central bank's 2018 circular which was later struck down.

In a background note submitted to the panel, the RBI reportedly described prohibition as a recognized policy option, recommending that authorities prevent the use of crypto in payments and settlements while restricting banking-sector exposure. The central bank warned that applying traditional regulation to crypto could legitimize speculative assets and create a false perception of safety among users. At the same time, the RBI urged policymakers to distinguish crypto from tokenized government securities, corporate bonds and other regulated financial instruments, warning that broad restrictions could hamper tokenization efforts.

The submission also addressed India's standing in Chainalysis' 2025 Global Crypto Adoption Index, where India ranked first. The RBI reportedly challenged the methodology behind such private-sector adoption rankings. The push mirrors the central bank's 2018 directive that ordered regulated entities to stop dealing in crypto or servicing individuals and businesses involved in such activity, a move that effectively cut off crypto exchanges from India's banking rails without banning individual ownership.

That 2018 circular was overturned by India's Supreme Court in March 2020 after a challenge led by exchanges and the Internet Mobile Association of India. The court upheld the RBI's authority to take preventive action but ruled the measure failed the proportionality test, noting the central bank had not demonstrated harm to the entities it regulated. In May 2021, the RBI clarified that banks could no longer rely on the invalidated circular when cautioning customers about crypto transactions, though it noted that regulated institutions could continue applying know-your-customer, anti-money laundering and foreign-exchange compliance requirements. The latest proposal now lands before the same parliamentary panel that has been gathering inputs from regulators and industry participants as it works toward a national framework.