Economy · GS3.1, GS2.2, GS3.6 · 2026-10-17 · 3 min read · 2026-10-17-am

RBI Governor on Crypto Caution and Support for Underlying Technology

RBI Governor Sanjay Malhotra stated that India supports innovation in distributed ledger technology and tokenisation but remains cautious about cryptocurrencies due to concerns over monetary sovereignty and capital flows. This stance impacts financial regulation and the digital payment ecosystem, relevant for both Prelims and Mains exams.

RBI promotes blockchain technology innovation while maintaining caution on cryptocurrencies to protect monetary policy and capital flow stability.

Why is this in the news?

On October 3, 2026, RBI Governor Sanjay Malhotra explained India's cautious approach to cryptocurrencies while endorsing the underlying technologies at the Kautilya Economic Conclave.

[1] The Hindu · Secondary

What is RBI's stance on cryptocurrencies and blockchain technology?

  • Support for technology. India supports innovation in distributed ledger technology and tokenisation, which are the underlying technologies of crypto assets.
  • Caution on cryptocurrencies. RBI remains cautious about cryptocurrencies due to concerns related to monetary sovereignty, monetary policy, and cross-border capital flows.
  • Monetary policy concerns. The RBI is concerned about the impact of cryptocurrencies on the 'singleness of money' and their implications for monetary policy, especially in emerging market economies.
  • Use in public-private partnerships. Some underlying technologies are being used within the central bank and in public-private partnership modes.

[1] The Hindu · Secondary

Why does RBI's stance on crypto matter for financial regulation?

  • Protecting monetary sovereignty. Caution on cryptocurrencies helps safeguard India's monetary sovereignty and control over monetary policy.
  • Capital flow management. Concerns over capital flows from cryptocurrencies influence RBI's regulatory approach to prevent destabilizing cross-border movements.
  • Alternative solutions for payments. RBI highlights that domestic payments are already fast and cheap, and for cross-border payments, central bank digital currencies (CBDCs) could be explored as alternatives.

[1] The Hindu · Secondary

How does RBI view the current payment ecosystem and liquidity?

  • Domestic payments efficiency. RBI notes that domestic payments in India are fast, cheap, and convenient, reducing the need for cryptocurrencies in this area.
  • Liquidity absorption. RBI absorbs liquidity from banks as part of monetary policy, with ₹71,971 crore absorbed recently.
  • Impact of global factors. Global interest rates and increased government and private spending, including on AI, affect bond yields and liquidity conditions in India.

[1] The Hindu · Secondary

Key numbers

FigureWhat it measuresSource
₹71,971 croreLiquidity absorbed by RBI from banks

[1] The Hindu · Secondary

Back to basics: Distributed Ledger Technology and Cryptocurrencies

Distributed ledger technology (DLT) is a digital system for recording transactions where the data is shared across multiple locations. Cryptocurrencies are digital assets that use DLT, such as blockchain, to enable secure and decentralized transactions. While DLT has applications beyond cryptocurrencies, concerns about monetary control and capital flows make regulators cautious about cryptocurrencies themselves.

Practice: MCQ, Mains and revision

Prelims MCQ

Consider the following statements about RBI's stance on cryptocurrencies and underlying technologies: 1. RBI supports innovation in distributed ledger technology and tokenisation but remains cautious about cryptocurrencies. 2. RBI views cryptocurrencies as beneficial for domestic payments and has fully integrated them into the payment system.

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Answer and trap

Answer: (a). Statement 2 is incorrect because RBI considers domestic payments already efficient and is cautious about cryptocurrencies, not fully endorsing them.

Mains question (15 marks)

Examine the Reserve Bank of India's cautious approach towards cryptocurrencies while promoting underlying blockchain technologies.

Examine: Explain RBI's dual stance on cryptocurrencies and blockchain technology and its implications for financial regulation and monetary policy.

Intro: RBI supports blockchain innovation but remains cautious about cryptocurrencies due to monetary concerns.

  • RBI endorses distributed ledger technology and tokenisation for their potential benefits.
  • Concerns over monetary sovereignty and capital flows lead to caution on cryptocurrencies.
  • RBI promotes alternative solutions like CBDCs for cross-border payments.
  • This stance balances innovation with financial stability and regulatory control.

Conclusion: RBI's approach reflects the need to harness technology while safeguarding economic and monetary stability.

Quick revision

Why is RBI cautious about cryptocurrencies?
Because of concerns over monetary sovereignty, monetary policy, and capital flows.
What technology underlying cryptocurrencies does RBI support?
Distributed ledger technology and tokenisation.
What alternative does RBI suggest for cross-border payments?
Central bank digital currencies (CBDCs).

Sources

  1. [1] The Hindu: RBI remains cautious on crypto, backs underlying technology: Governor Malhotra · 2026-10-15 · newspaper