India’s Central Bank Renews Push To Separate Banks From Crypto

The Reserve Bank of India has reportedly recommended shielding banks and financial institutions from exposure to crypto and privately issued stablecoins, as lawmakers work on a broader digital asset policy report. According to a report, RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented the central bank’s position to Parliament’s Standing Committee on Finance on Thursday, with a background note stating that prohibition remains a valid policy option.

RBI Warns Against Legitimizing Crypto

The central bank reportedly cautioned that applying standard financial regulation to crypto could create a false sense of safety for users and inadvertently legitimize speculative assets. At the same time, it urged lawmakers to separate crypto from tokenized government securities and corporate bonds, so restrictions would not interfere with regulated tokenization efforts.

Echoes 2018 Banking Restrictions

The proposal mirrors an approach the RBI took in 2018, when it barred regulated financial institutions from serving crypto businesses, effectively cutting exchanges off from the banking system without banning individual ownership. India’s Supreme Court struck down that directive in 2020, ruling it failed a proportionality test since the RBI had not demonstrated actual harm.

Despite the central bank’s cautious stance, India ranked first in a recent global crypto adoption index, though the RBI has reportedly questioned the methodology behind such rankings. In 2021, the RBI clarified that banks could no longer cite the invalidated circular to discourage crypto transactions, while still applying standard compliance checks.