The Reserve Bank of India (RBI) has called for banking restrictions on cryptocurrencies and privately issued stablecoins as it reviews its digital asset policy. RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented the central bank's position before the Parliamentary Standing Committee on Finance, accompanied by a background note outlining its recommendations.
The RBI recommended limiting banks' exposure to cryptocurrencies and privately issued stablecoins, preventing crypto from being used for payments while keeping tokenized regulated assets outside any restrictions. It also argued that regulating cryptocurrencies under conventional financial rules could give speculative assets an appearance of legitimacy and create a misleading sense of safety for users.
The central bank urged policymakers to distinguish cryptocurrencies from tokenized government securities, corporate bonds, and other regulated financial assets so that tokenization initiatives are not affected by crypto-related restrictions. This move closely resembles the RBI's position from 2018 when it directed regulated financial institutions to stop offering services to businesses and individuals dealing in cryptocurrencies.
India's Supreme Court struck down this circular in March 2020 after exchanges and the Internet and Mobile Association of India challenged the restriction. While the court accepted that the RBI had authority to take preventive measures, it ruled the banking ban was disproportionate because the central bank had not demonstrated harm to the institutions it supervised.