RBI calls for banking restrictions on crypto and private stablecoins

RBI has reportedly renewed its call to keep banks and payment systems insulated from cryptocurrencies and privately issued stablecoins as India reviews its digital asset policy.

As first reported by The Economic Times, Reserve Bank of India Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented the central bank’s position before the Parliamentary Standing Committee on Finance on Thursday, accompanied by a background note outlining its recommendations.

According to the report, the RBI said prohibition remains a recognized policy option and recommended preventing cryptocurrencies from being used in payments and settlements while limiting the banking sector’s exposure to digital assets and privately issued stablecoins.

The central bank 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 report said. 

At the same time, it reportedly 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.

The RBI also questioned the methodology used in private-sector crypto adoption rankings, despite India placing first in Chainalysis’ 2025 Global Crypto Adoption Index.

RBI revives long-standing banking concerns

The latest recommendations closely resemble the central bank’s position from 2018, when it directed regulated financial institutions to stop offering services to businesses and individuals dealing in cryptocurrencies. Although the move did not ban crypto ownership or trading, it effectively cut exchanges off from India’s banking system.

India’s Supreme Court struck down that 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.

A year later, the RBI clarified that banks could no longer rely on the invalidated circular when warning customers about crypto transactions. However, regulated entities were instructed to continue complying with know-your-customer, anti-money laundering, and foreign exchange rules.

Crypto oversight expands across multiple fronts

The RBI’s reported recommendations come as Indian authorities continue tightening oversight of the crypto sector through other regulatory channels.

Last month, India’s Financial Intelligence Unit asked several major crypto exchanges to preserve records of over-the-counter crypto transactions exceeding $10,000 from January 2026 onward, with compliance checks focusing on beneficial ownership, source of funds and destination wallets. The request followed earlier FIU guidance that strengthened customer verification requirements through measures such as live selfie checks, geolocation, IP tracking and periodic KYC updates.

Regulatory attention has also extended to stablecoin activity. Earlier this week, The Economic Times reported that enforcement action against crypto remittance firms disrupted domestic USDT supply, pushing the stablecoin’s premium in India above 8.5%. 

The same report noted that lawmakers were scheduled to discuss the country’s approach to virtual digital assets with the RBI and the Institute of Chartered Accountants of India, while the central bank has continued warning about risks linked to cryptocurrencies and privately issued stablecoins.