RBI Stays Cautious on Crypto as Malhotra Flags 'Huge' Risks
RBI Governor said Stablecoins, cryptos, buy-now-pay-later schemes challenge traditional regulations, deciding whether to ban, tolerate, or regulate these innovations is complex.
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India is maintaining a guarded stance on cryptocurrencies and stablecoins even as it accelerates work on a central bank digital currency and backs homegrown payment systems, Reserve Bank of India (RBI) Governor Sanjay Malhotra said in a speech at the Delhi School of Economics this week.
Speaking at the Second V.K.R.V. Rao Memorial Lecture on Thursday, 20 November, Malhotra said private digital tokens pose “huge” risks and stressed that the RBI’s first obligation is to preserve financial stability, not to accommodate every new product that arrives at the regulatory perimeter.
“Stablecoins, cryptos, they have a huge risk, and so we are adopting a very cautious approach towards it,” he said, framing the issue as part of a broader debate on how far regulators should go in admitting new instruments into the formal system.
Malhotra’s remarks sharpen the RBI’s long-running skepticism of privately issued digital assets at a time when the global market for cryptocurrencies has swelled again and dollar-backed stablecoins alone are worth more than $300 billion.
Indian officials have warned that widespread use of such tokens could complicate monetary policy, weaken capital controls and create new channels for volatility to spill into domestic markets.
The governor drew a clear distinction between speculative crypto assets and the digital rails India has already built. He pointed to the Unified Payments Interface (UPI) and systems such as NEFT as examples of infrastructure that have already solved domestic payment problems that advanced economies are now trying to address with new crypto rules.
In that context, he suggested, the case for stablecoins as a retail payments fix is far weaker in India than in markets where basic instant payments are still patchy.
Instead, the RBI is putting its weight behind the digital rupee.
Malhotra said the central bank is “promoting and experimenting with the CBDC” as a safer way to digitize money, with an eye on both domestic transactions and, over time, cross-border payments.
The digital rupee, unlike a private token, would sit on the central bank’s balance sheet and, in the RBI’s view, preserve the existing framework for monetary policy and financial stability.
Even so, the governor acknowledged that the final decision on how India treats private crypto assets will rest with the government.
New Delhi has yet to pass a comprehensive law governing virtual digital assets, and Malhotra reminded students that a working group set up earlier will “take a final call as to how, if at all, crypto is to be handled in our country.”
The US, meanwhile, has introduced the GENIUS Act to create a regulatory framework for dollar-backed payment stablecoins, a development Malhotra has recently referenced while arguing that India’s situation is different from advanced economies that lack similar domestic payment infrastructure.
Malhotra cast the RBI’s stance as part of a broader “boundary” problem in regulation: deciding what should fall inside the perimeter, what should remain outside, and when to move an activity from one side to the other.
In the speech text published by the central bank, he listed “stablecoins, cryptos, buy-now-pay-later schemes” as examples of innovations that challenge traditional categories and force regulators to choose whether to ban, tolerate or regulate them.
That decision, he said, demands a continuous judgment call on the balance between potential benefits and risks as innovation moves faster than formal rulemaking.
His answer, at least for now, is that crypto will not be allowed to outrun supervision. The RBI will continue to encourage regulated digital innovation such as UPI, digital lending and the CBDC pilots, but it is in no rush to grant private tokens the same standing.
