RBI Tells Parliament: Keep Crypto on the Bank Naughty Step 🪜

The Reserve Bank of India has urged lawmakers to wall off banks from crypto and privately issued stablecoins, recommending that digital assets be barred from payments and settlements and that direct banking-sector exposure be tightly limited, according to a background note submitted to the Parliamentary Standing Committee on Finance. Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented the central bank's position on Thursday to the panel, which is preparing a report on virtual digital assets for tabling during the monsoon session.

The RBI argued that applying conventional regulation to crypto could legitimize speculative assets and create a false sense of safety for retail users, while also raising illicit-finance concerns tied to drug trafficking and terror funding. Officials said prohibition remained a recognized policy option but pressed legislators to keep the restrictions from spilling into tokenized government securities, corporate bonds and other regulated instruments. Asked how India could ignore capital flight while jurisdictions such as Indonesia, Hong Kong and the UAE regulate the sector, the officials replied, "Not having a policy is also a policy," a committee member told Business Standard.

The stance echoes the RBI's 2018 circular, which directed regulated entities to stop dealing in crypto or servicing crypto firms, effectively cutting exchanges off from the banking rails. India's Supreme Court struck the measure down in March 2020 after a challenge by exchanges and the Internet and Mobile Association of India, ruling that the RBI had not shown proportional harm to the entities it regulated. In May 2021, the RBI clarified that banks could no longer cite the overturned circular when cautioning customers about crypto, though it permitted continued KYC, anti-money laundering and foreign-exchange checks.

India continues to rank first in Chainalysis' 2025 Global Crypto Adoption Index, a position the RBI has reportedly disputed on methodological grounds, while retail investors face a 30% tax on crypto gains and a 1% levy on every trade. The Securities and Exchange Board of India has signaled it could oversee tokens classified as securities, a question the RBI declined to answer on Thursday and pledged to address in writing. The panel is scheduled to meet the Department of Economic Affairs on July 15 before finalizing its recommendations on whether to enshrine banking-sector separation or move toward a framework closer to Europe's MiCA.