RBI Revives Crypto Prohibition Push Amid Growing Indian Trading Activity

The Reserve Bank of India (RBI), the country's central bank, is pushing to keep cryptocurrency out of the financial system. The RBI wants banks and financial institutions barred from any exposure to crypto assets and privately issued stablecoins.

This stance revives a fight the RBI lost in 2018, when a court struck down policies that had effectively banned crypto dealings. Since then, digital assets have existed in a grey zone.

The RBI is concerned about contagion risks to lenders and wants to limit them by keeping digital assets outside the regulated financial system. However, major Indian banks have stayed away from the sector after repeated cautionary statements from the RBI.

The tax department estimates that nearly 39 million Indians trade cryptocurrencies, holding around $2.1 billion in digital assets at the end of May. The RBI extended its warning to stablecoins, tokens pegged to fiat currencies, citing concerns about monetary sovereignty and revenue loss for the government.