RBI Backs Containment Strategy to Limit Banks’ Exposure to Crypto and Stablecoins

The Reserve Bank of India (RBI) has reportedly supported a containment approach for digital assets aimed at shielding banks and other financial institutions from exposure to cryptocurrencies and privately issued stablecoins, as lawmakers prepare a report on India’s digital asset policy. According to Cointelegraph, RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented the central bank’s position to the Parliamentary Standing Committee on Finance on Thursday, as reported by The Economic Times. In a background note submitted to the panel, the RBI reportedly said prohibition remained a recognized policy option and recommended preventing the use of crypto in payments and settlements while restricting banking-sector exposure. The central bank also reportedly argued that applying traditional regulation to crypto could legitimize speculative assets and create a false perception of safety among users. At the same time, it urged policymakers to distinguish crypto from tokenized government securities, corporate bonds, and other regulated financial instruments so that restrictions would not hinder tokenization.

The RBI’s reported stance comes as India ranked first in Chainalysis’ 2025 Global Crypto Adoption Index, though the central bank reportedly challenged the methodology behind private-sector adoption rankings. The latest proposal also echoes the RBI’s earlier approach from 2018, when it directed regulated financial institutions to stop dealing in crypto or providing services to individuals and businesses involved in crypto activity. That move effectively cut off crypto exchanges from India’s banking system without prohibiting individuals from owning or trading crypto. India’s Supreme Court overturned the circular in March 2020 after a challenge brought by exchanges and the Internet Mobile Association of India. While the court recognized the RBI’s authority to take preventive action, it found the measure failed the test of proportionality, noting the central bank had not shown harm suffered by entities it regulated. In May 2021, the RBI clarified that banks could no longer cite the invalidated circular when cautioning customers against crypto transactions, while stating that regulated institutions could continue applying know-your-customer, anti-money laundering, and foreign-exchange compliance requirements.