India Remains Cautious on Crypto While Backing DLT and…

RBI Governor Sanjay Malhotra says India supports distributed ledgers and tokenization but remains wary of cryptocurrencies because of risks to monetary sovereignty, monetary policy and capital flows. India will continue encouraging blockchain-based financial innovation while maintaining a cautious approach toward cryptocurrencies, Reserve Bank of India Governor Sanjay Malhotra said, drawing a clear distinction between digital assets and the technology underpinning them. Speaking at the Kautilya Economic Conclave on October 3, Malhotra said the RBI supports technologies including distributed ledger technology and tokenization and is already using some of them internally and through public-private partnerships. Cryptocurrencies themselves remain a different proposition.Malhotra identified monetary sovereignty, monetary policy and capital flows as central concerns, particularly for emerging economies that maintain restrictions on cross-border movement of capital. He also raised the principle of the “singleness of money” — that different forms of money denominated in the same currency should remain interchangeable at the same value. The position reinforces India's longstanding policy divide: blockchain infrastructure can be useful even when policymakers remain skeptical about privately issued cryptocurrencies functioning as money.

RBI Sees Tokenization Without Private Crypto Money

India's approach increasingly separates three concepts that are sometimes grouped together: cryptocurrencies such as Bitcoin, tokenized conventional financial assets and central-bank digital currencies. The RBI sees potential applications for the latter two without necessarily accepting private cryptocurrencies as an alternative monetary system. Malhotra argued that cryptocurrency does not solve a particularly pressing domestic payments problem in India because the country's existing payment infrastructure is already fast, inexpensive and convenient. Cross-border payments remain a more significant challenge, and he said CBDCs could be among the technologies used to improve them.That fits the RBI's broader experimentation with the digital rupee and tokenized financial infrastructure. The central bank's position also has historical continuity. An Indian government committee examining virtual currencies in 2019 supported applications of DLT in areas including loan tracking, collateral management, insurance claims, fraud detection and securities-market reconciliation even while recommending stringent restrictions on private cryptocurrencies. Tokenization potentially extends that model by representing deposits, securities or other conventional financial assets digitally while keeping issuance and settlement inside a regulated framework.

Crypto Remains Legal but Tightly Controlled

The cautious stance should not be interpreted as a new Indian cryptocurrency ban. India still does not have a comprehensive law prohibiting ownership or trading of cryptocurrencies. Instead, the sector operates under a combination of taxation and anti-money-laundering requirements while policymakers continue debating a broader regulatory framework. Virtual Digital Asset service providers operating in India are subject to the Prevention of Money Laundering Act, regardless of whether the company is physically located in India. That regime remains actively enforced.On September 9, India's Financial Intelligence Unit issued non-compliance notices to 15 VDA service providers, including Weex, Blofin, Bitunix, DigiFinex, Toobit, XT.com and WOO X, while seeking restrictions on public access to services found to be operating illegally. The regulatory contrast is therefore becoming clearer. India is not rejecting digital financial infrastructure. The RBI is actively supporting technologies that can make regulated finance more programmable and efficient, including DLT, tokenization and CBDCs. What policymakers remain reluctant to embrace is the use of privately issued cryptocurrencies as parallel forms of money capable of operating beyond conventional monetary and capital-flow controls. Malhotra's comments therefore reinforce rather than reverse India's policy direction: promote blockchain technology where it strengthens regulated finance, while remaining cautious about crypto assets where they could affect monetary sovereignty and financial stability.