The Reserve Bank of India (RBI) has recommended that cryptocurrencies and other virtual digital assets (VDAs) should not be legalized in India, citing threats to the economy and banking system. The central bank presented its position on July 2 to the Parliamentary Standing Committee on Finance, chaired by BJP MP Bhartruhari Mahtab, during a session focused on a study of VDAs and potential regulatory approaches, according to medianama.com.
At the committee meeting, the RBI outlined a containment strategy favoring prohibition to shield banks and regulated financial institutions from exposure to cryptocurrencies. The central bank argued that cryptocurrencies are privately issued assets beyond its control and pose risks such as facilitating terror funding and narcotics smuggling. It also highlighted challenges in regulating crypto held by offshore entities. The RBI referenced bans on crypto in countries like Qatar and China and noted that European countries allow crypto only under strict regulation, as reported by medianama.com.
The RBI also criticized stablecoins—cryptocurrencies pegged to fiat currencies like the US dollar—saying they undermine monetary sovereignty. Instead, it advocated for the adoption of the central bank digital currency (CBDC), the digital rupee, which the RBI issues and backs with the Indian rupee. This stance aligns with the RBI’s broader efforts to maintain control over the monetary system and limit risks posed by decentralized digital assets, medianama.com detailed.
The Parliamentary Standing Committee on Finance continues to examine the regulatory framework for VDAs following the RBI’s submission on July 2. The committee’s findings and recommendations will influence India’s policy on cryptocurrencies and digital assets in the near term, medianama.com stated.