RBI Keeps a Close Eye on Global Cryptocurrency Developments as India Prepares Crypto Policy Paper
By Jatin Takkar, ET Bureau | Updated: July 11, 2025, 6:00 AM IST
The Reserve Bank of India (RBI) is actively monitoring global developments in the cryptocurrency space, as India moves closer to formalizing its stance on digital assets through a forthcoming policy paper. The central bank’s cautious approach comes amid changing tides internationally, notably influenced by the United States under Donald Trump’s recent pivot from skeptic to supporter of crypto technology.
Global Crypto Shift Spurs RBI Vigilance
According to sources familiar with RBI’s internal deliberations, governor Sanjay Malhotra informed a parliamentary standing committee that the central bank is keeping a vigilant watch on worldwide crypto trends. This heightened attention follows the Trump administration’s actions such as establishing a bitcoin reserve and pushing pro-cryptocurrency legislation — a significant shift from previous skepticism towards digital currencies.
India’s government, having received clearance from its top echelons, is expected to soon publish a detailed policy paper on cryptocurrencies. RBI Governor Malhotra described the document as a “work in progress” while briefing MPs. The paper is part of India’s measured effort to evaluate the regulatory framework around virtual digital assets amid both opportunities and challenges they present.
UPI’s Role and RBI’s Concerns
During his testimony before the Parliamentary Standing Committee on Finance, chaired by BJP MP Bhartruhari Mahtab, Malhotra underscored the effectiveness of the Unified Payment Interface (UPI) in India’s digital transaction ecosystem. He noted that UPI continues to serve as a highly efficient platform for internal digital payments, signaling limited necessity for cryptocurrencies in the domestic market.
Nevertheless, the RBI remains wary of the risks cryptocurrencies may pose to financial stability and monetary policy. The bank has repeatedly expressed concerns about their potential misuse in illicit activities such as money laundering and terror financing.
Central Bank Digital Currency (CBDC) and Regulatory Measures
In parallel, the RBI is progressing with the development of its own Central Bank Digital Currency (CBDC). This initiative aims to offer a government-backed, safer alternative to privately issued cryptocurrencies. Despite not legally recognizing crypto assets, India taxes gains from virtual digital assets at 30%, and mandates that crypto exchanges operating in the country register with the Financial Intelligence Unit (FIU) to curb illicit transactions.
Governor Malhotra reiterated the RBI’s caution on cryptos, emphasizing that unregulated digital assets could undermine the country’s financial system and monetary framework.
Economic Outlook and Currency Notes Update
Besides cryptocurrency matters, the RBI’s presentation to the parliamentary panel highlighted India’s strong economic prospects for fiscal year 2025-26. India is expected to remain the fastest-growing major economy, with external risks from global financial volatility and geopolitical tensions potentially impacting inflation.
Addressing a query about the fate of the Rs 2,000 currency notes, which were introduced during the 2016 demonetization drive to curb black money, Malhotra clarified that these notes have not been declared invalid but are no longer in circulation and will not be printed anymore.
In summary, the RBI is treading carefully amidst rapid global shifts in cryptocurrency regulation and adoption. While recognizing digital payments’ evolution through UPI, RBI continues to scrutinize virtual digital assets’ impact on financial safety, preparing India’s policy framework to address both innovation and risk.
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Related Topics: Reserve Bank of India, Cryptocurrency Developments, Central Bank Digital Currency, Financial Stability, Crypto Regulation in India, Sanjay Malhotra, Bitcoin Reserve
Tags: #RBI #Cryptocurrency #IndiaEconomy #UPI #CBDC #FinancialStability #CryptoRegulation