RBI Urges Lawmakers to Protect Banks from Crypto Exposure

The Reserve Bank of India (RBI) has urged lawmakers to protect the country's banks and regulated financial institutions from exposure to cryptocurrencies and privately issued stablecoins. In a submission to a parliamentary panel, the RBI expressed concerns that crypto could finance illegal activities such as terror funding and drug trafficking.

According to The Economic Times, Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented the central bank's position before the Parliamentary Standing Committee on Finance last Thursday. They emphasized that prohibition remains a live policy option for India in dealing with digital assets.

The RBI recommended a containment strategy that would bar banks and regulated entities from dealing in crypto and privately issued stablecoins, while also blocking their use in payments and settlements. This approach aims to ring-fence the formal financial system and keep regulated lenders away from crypto exposure.