RBI Governor Sanjay Malhotra: India Cautious on Crypto, Backs Blockchain and Tokenisation Technologies

India continues to take a cautious view of cryptocurrencies while supporting the development and use of the technologies that underpin crypto assets, Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Saturday.

According to a PTI report, Malhotra made the remarks at the Kautilya Economic Conclave. He said the country backs innovation involving distributed ledger technology and tokenisation. Some of these technologies are already being explored by the central bank, as well as through public-private partnership initiatives.

Cryptocurrencies, however, raise wider concerns around monetary sovereignty, monetary policy and capital flows, particularly for emerging economies, the Governor said.

Crypto debate linked to “singleness of money”

Malhotra said the debate over crypto assets is tied to the concept of the “singleness of money” and the possible impact of alternative forms of money on monetary policy.

He noted that the main problem cryptocurrencies are expected to solve is not domestic payments, as payments within India and several other countries have become relatively fast, inexpensive and convenient. The bigger challenge, according to him, lies in cross-border payments, where alternative solutions, including central bank digital currencies (CBDCs), could be explored.

India’s cautious approach to crypto assets therefore runs alongside efforts to develop technologies that could improve financial systems without creating similar monetary and financial risks.

Global bond yields also a concern

The Governor also spoke about the rise in global public debt and bond yields. He attributed the movement in yields largely to demand and supply conditions, pointing out that spending by both governments and the private sector has increased. Spending linked to artificial intelligence (AI) has also added to the demand for funds, he said.

“Money is scarce, spending has increased,” Malhotra said, citing higher expenditure by governments and private companies as a factor behind rising bond yields and debt levels.

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Monetary policy focused on domestic conditions

He said the RBI’s monetary policy remains primarily focused on India’s domestic growth and inflation conditions. Developments in global interest rates also matter, he added, because they can affect real interest rates in India.

Malhotra said the RBI therefore needs to stay attentive to international interest-rate movements while framing monetary policy for domestic economic conditions.