RBI Renews Call to Keep Banks Away From Crypto and Private Stablecoins
In testimony to a parliamentary committee and in documents reviewed by Reuters, the Reserve Bank of India has restated its case for barring banks from crypto exposure and banning crypto for payments, even as the government's own policy on the asset class remains undecided.
The Indian Account desk · 2026-07-08
India's central bank has once again asked the country's lawmakers to keep the banking system at arm's length from cryptocurrencies. Appearing before Parliament's Standing Committee on Finance on 3 July 2026, RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan recommended banning the use of crypto assets for payments and settlements and limiting banks' exposure to the sector, according to the field notes gathered by this desk. Days later, government documents reviewed by the Reuters news agency showed the same institution pressing its case more broadly.
India's central bank has reasserted a call for a cryptocurrency policy "leaning towards prohibition," while the country's tax department warned that trading via offshore exchanges is hard to track. The RBI said banks and financial institutions should be barred from holding, trading or gaining exposure to crypto assets and privately issued stablecoins to limit contagion risks.
This matters because it concerns the plumbing of the financial system, not the fortunes of speculators. The RBI's stated worry is contagion — the risk that losses in a volatile, lightly governed asset class could travel through banks that hold or lend against those assets and reach ordinary depositors. Its instrument is a firewall: keep the assets outside the regulated core.
Two distinct things are on the table, and they are easy to conflate. The first is a restriction on banks — that regulated lenders neither hold crypto nor take on exposure to it. The second is a functional ban on using crypto assets and privately issued stablecoins for payments and settlements. A stablecoin is a token designed to hold a fixed value by being pegged to a currency such as the rupee or the dollar; "privately issued" means it is minted by a company rather than a central bank. The RBI's own digital currency, the e-rupee, is the state-backed alternative it would prefer people use.
The central bank also made a subtler argument, per the desk's notes: that applying existing financial rules to crypto could inadvertently confer legitimacy on assets it regards as speculative. In other words, regulating a thing can look like blessing it — a reason the RBI gives for containment rather than accommodation.
The context is a policy vacuum. India has allowed cryptocurrencies to exist in a grey zone since a court in 2018 struck down Reserve Bank of India policies that effectively banned them. Since then the state has neither embraced the asset class nor outlawed it; instead it has taxed transactions while declining to legalise or prohibit the underlying trade.
That ambiguity has not stopped adoption. Despite India's policy ambiguity, the country has nearly 39 million crypto traders who held about $2.1 billion in digital assets at the end of May. Nor has it forced banks in: at present, Indian banks are not prohibited from dealing in cryptocurrencies, but major lenders have avoided them following repeated warnings from the RBI. The proposal, then, would harden into rule what caution has already made into practice.
The global backdrop cuts the other way. Cryptocurrencies have gained greater acceptance globally following policy changes in the United States, where legislation backing broader use of stablecoins has fuelled expectations of wider adoption. While countries like Japan and Singapore have moved to regulate cryptocurrencies, China has prohibited the use of such tokens. India's central bank is arguing, in effect, for the Chinese pole of that spectrum even as allied economies drift toward rules-based tolerance.
The RBI does not have the last word, and the record shows it does not speak for the whole state. In September, in internal discussions, India's finance ministry, after consultations with the RBI, backed limited regulatory clarity for virtual assets, arguing that existing tax and other laws had helped contain risks from the asset class. The newer documents, dated May and June, mark a firmer line. They reveal a preference among key Indian agencies to use tighter curbs on virtual digital assets, even though the government has yet to adopt a policy to ban or regulate them.
Two caveats belong on the record. The material is drawn from documents reviewed by Reuters and from committee testimony, not from a published RBI rule; and India's finance ministry and the RBI did not respond to Reuters requests for comment. A long-promised policy paper is expected to reach Parliament during the monsoon session, at which point recommendation would meet decision. Until then, the firewall the RBI wants remains a proposal — and the 39 million people already trading are governed by a policy the state has not yet written.