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RBI Tells Parliament Isolate Banks From Crypto Ahead of Policy Report
India's central bank told Parliament it wants banks isolated from crypto and stablecoins. The government's upcoming policy report will test whether the RBI's containment approach becomes law.
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The RBI presented to the Indian Parliament a strategy to isolate banks from cryptocurrencies and private stablecoins. The central bank warned that regulating cryptocurrencies with traditional frameworks could legitimize speculative assets and create a false sense of security.
The presentation comes ahead of the government's policy report on digital assets. The RBI has long urged banks to avoid crypto involvement, a stance that predates the Supreme Court's 2020 decision to overturn the 2018 banking ban.
For the Indian crypto sector, the containment strategy means banks will remain off-limits for crypto transactions. Local exchanges will not have access to the formal banking system for fiat deposits and withdrawals. Stablecoin issuers would be unable to hold reserves in domestic bank accounts. The practical effect is a de facto ban on the regulated crypto industry, even without a legislative prohibition.
The RBI's approach puts it at odds with parts of the government that have explored a more permissive regulatory framework. The central bank's submission shows it sees no middle ground between a ban and the risks it associates with private digital assets.