The Reserve Bank of India (RBI) has reaffirmed its stance on containing risks linked to cryptocurrencies by recommending that banks and other regulated financial institutions avoid exposure to crypto assets and privately issued stablecoins. This position was communicated to the Parliamentary Standing Committee on Finance as part of ongoing discussions surrounding India’s digital asset regulatory framework.

According to officials presenting the central bank’s viewpoint, prohibition of certain crypto activities remains a valid policy tool. The RBI emphasized that cryptocurrencies should not be permitted for payments and settlements, aligning with its cautious approach that seeks to shield the formal financial system from volatile and speculative digital assets. The central bank also warned that applying conventional regulatory models to such assets might inadvertently endorse them, potentially misleading users about their safety.

However, the RBI underlined the importance of differentiating cryptocurrencies from regulated instruments such as tokenized government securities, corporate bonds, and other established financial products. Policymakers were urged to design restrictions without hampering the growth of tokenization technologies that can enhance market efficiency and transparency.

This recommendation revives the RBI’s earlier strategy from 2018, when it barred regulated entities from providing services connected to cryptocurrencies. That directive effectively severed the link between crypto exchanges and India’s banking network, though individuals remained free to trade privately. The Supreme Court later invalidated this circular in 2020, ruling that the RBI had not demonstrated sufficient harm to justify such a sweeping measure, highlighting legal concerns over proportionality and regulatory overreach.

Following the court’s decision, the RBI clarified that banks could no longer rely on the annulled circular to caution against crypto dealings. Yet, regulated institutions must continue enforcing know-your-customer, anti-money laundering, and foreign exchange compliance procedures for clients involved in crypto transactions.

Separately, India was ranked highest in global crypto adoption indices compiled by private firms, though the RBI has expressed skepticism over such assessments and their methodologies. The central bank’s approach signals a continued preference for cautious containment rather than broad acceptance of cryptocurrencies within the mainstream financial sector.