RBI Governor Says India Supports Crypto Technology, Remains Cautious On Cryptocurrencies

The Reserve Bank of India (RBI) is continuing to take a cautious view of cryptocurrencies, with Governor Sanjay Malhotra reiterating the central bank’s cautious approach towards digital assets. He also highlighted central bank digital currencies (CBDCs) as one possible way to address issues in cross-border payments.

Malhotra made the comments during the Fifth Kautilya Economic Conclave in New Delhi on Saturday, where he discussed newer financial technologies and their impact on the financial system.

According to ANI, the governor said cryptocurrencies raise concerns over the singleness of money and monetary policy. For emerging market economies, he also pointed to issues arising from restrictions on capital flows.

Why Is RBI Cautious On Crypto?

Malhotra drew a distinction between the technology used in digital assets and cryptocurrencies themselves. He said the RBI supports the use of such technologies and is already using some of them. “Our approach is we need to promote the underlying technologies, and we are using some of these in the central bank and outside in PPP mode. But insofar as crypto is concerned, it has been a cautious approach,” he said.

The governor also said technologies such as artificial intelligence, tokenisation and new forms of financial intermediation could improve efficiency. However, he stressed that financial innovation would need to preserve trust in the financial system, including settlement finality and financial integrity.

CBDCs Emerge As Alternative For Cross-Border Payments

Malhotra pointed to cross-border payments as an area where newer financial technologies could play a greater role. Domestic payments in countries such as India have already become faster, cheaper and more convenient, making international transactions a bigger challenge to address.

He said CBDCs could offer one way to tackle these issues. This puts the digital rupee and other central bank-issued digital currencies in the discussion around improving international payments, without treating private cryptocurrencies as the only technological solution. For India, the RBI has been developing and testing the digital rupee while maintaining a cautious position on private cryptocurrencies.

India’s approach to crypto assets also includes taxation and compliance requirements. Virtual digital assets (VDAs) are subject to a 30 per cent tax on income from transfers and a 1 per cent TDS on specified transactions. VDA service providers are also covered by anti-money laundering requirements under the Prevention of Money Laundering Act (PMLA) with applicable entities required to register, with the Financial Intelligence Unit-India (FIU-IND).

While crypto transactions are covered by tax and compliance requirements, private cryptocurrencies remain outside India’s official currency system, with the RBI continuing to maintain a cautious position on them.