Our Correspondent / New Delhi
The Reserve Bank of India (RBI) has reiterated its opposition to granting formal legitimacy to private cryptocurrencies, cautioning that their integration into the financial system could undermine monetary sovereignty, weaken the banking system and create systemic risks for the economy.
In a background note prepared for the Parliamentary Standing Committee on Finance, which is examining the subject “A Study on Virtual Digital Assets (VDAs) and Way Forward”, the central bank said the existing global regulatory framework remains insufficient to address the broader macroeconomic risks posed by crypto assets, particularly in emerging market and developing economies such as India.
The RBI observed that while the Financial Stability Board (FSB) has evolved a regulatory framework for crypto assets and global stablecoins, critical issues such as currency substitution, erosion of monetary policy effectiveness, capital flow management, bank disintermediation and loss of seigniorage remain “under-explored”. It cautioned that formalising cryptocurrencies without a comprehensive assessment of these risks could expose the financial system to “significant, potentially uncontrollable risks”, especially if their adoption becomes widespread.
The note said the global crypto market was valued at about $2.08 trillion as of June 2026. In India, 54 crypto service providers are registered with the Financial Intelligence Unit-India, with nearly 3.93 crore KYC-verified users holding crypto assets worth around ₹20,436 crore.
Questioning the claimed benefits of crypto assets, the RBI said evidence supporting assertions relating to financial inclusion, cheaper cross-border payments and efficiency gains remains limited. Instead, it pointed to concerns over fraud, money laundering, terrorist financing, cyberattacks and consumer protection. The note cited global estimates indicating that illicit crypto transactions reached $158 billion in 2025, while stablecoins accounted for the overwhelming share of such activity.
The central bank also warned that stablecoins, despite being linked to fiat currencies, remain private liabilities without sovereign backing or access to a lender of last resort, making them susceptible to “run” and “de-peg” risks.
The note comes as an inter-ministerial group led by the Department of Economic Affairs is preparing a discussion paper on the future regulatory framework for virtual digital assets in India.