RBI Backs Tokenization but Keeps Crypto Payments on Guard

The Reserve Bank of India is drawing a distinction between the technology behind tokenization and the crypto assets built on top of it.

At the Fifth Kautilya Economic Conclave in New Delhi on October 3, 2026, Governor Sanjay Malhotra said the RBI supports new technologies that can make the financial system more efficient, but remains cautious about crypto itself. His concern is less about whether innovation is useful and more about what widespread crypto use could mean for money, monetary policy and capital flows.

Why the RBI Is Keeping Crypto at Arm's Length

Malhotra tied the RBI's caution to the "singleness of money", a reference to the idea that money needs a clear and stable place in the financial system. In emerging economies with restrictions on capital flows, he said, crypto adoption could affect the effectiveness of monetary policy.

"The approach of India remains cautious with regard to crypto, considering the ramifications it may have on monetary sovereignty, monetary policy and capital flow."

The governor also rejected the idea that crypto is needed to improve domestic payments in India. He described existing domestic payments as already fast, cheap and convenient. For him, the more difficult problem is cross-border payments, where he said other solutions, including central bank digital currencies, can be explored.

That position is narrower than a blanket rejection of digital money. It also doesn't mean the RBI sees every blockchain use case in the same way. The question is whether privately issued crypto assets are necessary, or whether the benefits can be obtained through regulated and controlled systems.

Tokenization, With Conditions

The RBI's written speech listed tokenization among the innovations that could improve efficiency. It paired that support with conditions, including sound institutions, settlement finality, the singleness of money and financial integrity.

In other words, the RBI's support for tokenization comes with a test. A more efficient settlement process is attractive, but it still needs rules that make the underlying money and final settlement reliable.

The distinction matters because tokenization can refer to putting assets or claims onto a token-based system without necessarily creating a freely traded crypto asset. The technology and the asset class are related, but they aren't interchangeable.

Private Stablecoins Are the Bigger Worry

Foreign-currency stablecoins sit at the centre of the RBI's concern. Malhotra's reported remarks point to the risk that mass adoption could pull financial activity away from domestic banking and currency systems. That could dilute monetary sovereignty, which is a core concern for a central bank.

The report also said the RBI has previously warned that broad crypto adoption could weaken monetary policy and the management of capital flows. Those warnings are easier to understand when viewed as a question of control: who issues the money, where financial activity takes place, and whether it can move across borders without creating problems for the currency system.

The available material does not include a new RBI circular or detailed restrictions announced alongside the speech. It also doesn't identify the projects referred to when Malhotra said the bank is using some of the technologies inside the central bank and outside it through public-private partnerships.

For now, the RBI's position is clear enough to describe, if not precise enough to turn into a complete rulebook. It supports the infrastructure that could improve financial settlement, while keeping privately issued crypto assets and stablecoins under scrutiny. The difference is important: better technology does not automatically mean a different monetary system.