India’s RBI Cautious on Crypto, Stablecoins

Reserve Bank of India Governor Sanjay Malhotra has articulated the central bank’s position with striking clarity, emphasizing that cryptocurrencies and stablecoins present significant risks to India’s financial ecosystem. The RBI’s primary concern centers on the inherent volatility of digital assets and their potential to circumvent the protective measures that underpin traditional financial systems. Malhotra’s remarks, delivered during a memorial lecture at Delhi School of Economics, reflect the central bank’s consistent position that unregulated digital currencies could destabilize the carefully constructed safeguards protecting the Indian rupee and broader financial markets.

The timing of these warnings is particularly significant as they come during a period when the Indian government is actively weighing the introduction of a formal stablecoin framework. This creates a notable tension between the RBI’s cautious regulatory approach and potential government moves toward digital asset integration. Malhotra’s characterization of the central bank’s stance as “very cautious” underscores the depth of concern within India’s primary financial institution about the systemic risks posed by private digital currencies operating outside established regulatory perimeters.

While the RBI maintains its defensive position, the Indian government’s consideration of a stablecoin framework represents a potential pivot point in the country’s digital asset policy. Stablecoins—digital currencies pegged to stable assets like the Indian rupee—present both opportunities and challenges that complicate the regulatory landscape. The RBI’s persistent warnings suggest deep-seated concerns that even regulated stablecoins could introduce vulnerabilities into India’s financial infrastructure, potentially creating backdoors that bypass traditional monetary controls and oversight mechanisms.

The regulatory tension highlighted by Malhotra’s remarks reflects a broader global debate about how to balance innovation with financial stability. For the RBI, the priority remains protecting the integrity of India’s financial systems from what it perceives as uncontrolled digital assets that could amplify market volatility and create contagion risks. The central bank’s position suggests that any stablecoin framework would need to incorporate robust safeguards to address these concerns, potentially creating significant compliance burdens for digital asset providers seeking to operate within India’s financial ecosystem.

Amid its cautious stance toward private cryptocurrencies and stablecoins, the Reserve Bank of India has been actively promoting its own central bank digital currency (CBDC) as a regulated alternative. The digital rupee represents the RBI’s vision for how digital currency technology can be integrated into India’s financial system without compromising stability or regulatory oversight. By developing a state-backed digital currency, the central bank aims to harness the benefits of digital payment innovation while maintaining direct control over monetary policy and financial safeguards.

The push for CBDC adoption aligns with the RBI’s broader mandate to ensure financial stability while modernizing India’s payment infrastructure. Malhotra’s emphasis on the risks of private digital assets implicitly positions the digital rupee as the safer, more reliable option for India’s digital financial future. This strategic positioning suggests that the RBI views CBDC not merely as a technological upgrade but as a defensive measure against what it perceives as the destabilizing potential of privately-issued cryptocurrencies and stablecoins operating in the Indian market.

The contrast between the RBI’s promotion of its digital rupee and its warnings about private digital assets highlights the central bank’s preference for controlled innovation within established regulatory frameworks. As the government considers stablecoin regulation, the RBI’s persistent emphasis on CBDC as the preferred path forward suggests ongoing tension between different approaches to digital currency integration in one of the world’s largest economies.