RBI Governor Malhotra says India stays cautious on crypto but backs tokenization
In brief
- RBI Governor Malhotra said India's crypto stance remains cautious, citing monetary sovereignty, monetary policy and capital flow.
- The RBI supports distributed ledger technology and tokenization but not privately issued crypto assets.
- India's fast, cheap domestic payments undercut the payments case for crypto, Malhotra said.
- On cross-border payments, the RBI points to CBDCs and interconnected regulated systems instead.
Blockchain yes, private crypto no
The RBI's split is pretty clear. According to U.Today's report on the speech, the central bank is strongly supportive of distributed ledger technology and tokenization, but it doesn't agree that privately issued crypto assets are needed to get the benefits of blockchain-style technology.
The "singleness of money" principle was cited as one of the top concerns. Foreign-currency stablecoins are a big part of that worry, since their mass adoption could dilute monetary sovereignty.
Malhotra also pointed to crypto's possible effects on monetary policy and capital flow (which the report says are particularly relevant in emerging economies that deal with cross-border capital flow constraints). The RBI has previously warned that mass adoption of crypto assets could blunt monetary policy, weaken capital flow management and expose the system to financial and macroeconomic stability risks.
The payments argument
Malhotra went after one of crypto's most common pitches: payments. India already has infrastructure for fast, cheap and convenient domestic payments, he said, so that's not where the real gap is.
"The problem which you are trying to solve is primarily not so much the problem of domestic payments," Malhotra said.
Cross-border payments are the more important problem, he argued. Even there, the RBI sees central bank digital currencies (CBDCs) and interconnected regulated payment systems as the alternatives, not crypto.
Where the RBI has leaned before
None of this is a new ban or rule.
It's Malhotra's stated position, and it lines up with earlier reporting. In July, Reuters reviewed government documents showing the RBI still tilted toward a national crypto policy "leaning towards prohibition," according to U.Today. The RBI also reportedly pressed for regulated banks and other financial institutions to be restricted from holding, trading or having exposure to crypto assets or private stablecoins. U.Today didn't name a source for that detail.
Frequently asked questions
Why is India's central bank cautious about crypto?
RBI Governor Sanjay Malhotra cited crypto's possible effects on monetary sovereignty, monetary policy and capital flow. The 'singleness of money' principle was cited as a top concern, and foreign-currency stablecoins worry the RBI because mass adoption could dilute monetary sovereignty.
Does the RBI support blockchain technology?
Yes. The RBI was described as strongly supportive of distributed ledger technology and tokenization. It doesn't agree, though, that privately issued crypto assets are needed to realize the benefits of blockchain-style technology.
What does the RBI see as the alternative to crypto for payments?
Malhotra said India already has fast, cheap and convenient domestic payment infrastructure. He called cross-border payments the bigger problem, and the RBI sees CBDCs and interconnected regulated payment systems as the alternatives to crypto there.
