India’s central bank is testing tokenized bonds and a digital rupee, while keeping private cryptocurrencies at arm’s length. That distinction sits at the heart of the Reserve Bank of India’s cautious approach to crypto: support regulated uses of new financial technology, but limit risks to the rupee and monetary policy.
- Private crypto: The RBI sees risks to monetary sovereignty, policy control and capital flows.
- Tokenization: Regulators are testing digital records and settlement for conventional securities.
- Digital rupee: Pilots cover securities settlement and targeted government transfers. CBDCs are also being discussed for cross-border settlement.
- Rules: Tax and anti-money-laundering requirements apply, but the reported Oct. 4 status was neither a comprehensive market-wide framework nor a ban.
Speaking at the Kautilya Economic Conclave in New Delhi on Oct. 3, RBI Governor Sanjay Malhotra described the central bank’s stance on private crypto as “cautious.” He pointed to potential risks to monetary sovereignty, monetary policy and capital flows.
Malhotra also cited the “singleness of money, ” the principle that different forms of money denominated in the same currency should have equal value and remain interchangeable. The RBI worries that privately issued forms of money with different backing, values or rules could make them harder to exchange and weaken monetary control.
That caution does not cover all technology associated with crypto. Malhotra said the RBI promotes distributed ledger technology (DLT) and tokenization through internal work and public-private partnerships.
“So, our approach has been to promote the underlying technologies, ” Malhotra said.
DLT records and shares information across a digital ledger. Tokenization represents or records an asset digitally, which can change how ownership and transactions are handled. The effect on an asset’s legal rights depends on the instrument and its documentation.
Tokenized bonds remain securities
At the Global Fintech Festival in September, Malhotra outlined RBI work on programmable central bank digital currency (CBDC), tokenized certificates of deposit and corporate bonds, with settlement through the wholesale digital rupee.
The RBI’s Unified Markets Interface is being used to study tokenized certificates of deposit and digital settlement infrastructure. Separately, the Securities and Exchange Board of India (SEBI) announced the successful launch of its tokenized corporate-bond pilot on Sept. 10. The pilot uses DLT to record securities, while the cash side settles in central bank money.
Reported transactions in tokenized bonds settled in digital rupees total ₹1, 025 crore across three issuances: ₹500 crore from REC, ₹500 crore from Larsen & Toubro, and ₹25 crore from IIFL.
In these pilots, tokenization changes how securities are recorded or settled. It does not, by itself, change the bonds’ conventional contractual rights, interest terms or repayment obligations. Those depend on the securities and their legal documentation. A digital record will not erase an issuer’s debt. The legal distinctions matter when assessing tokenization and its financial-market risks.
Domestic digital rupee uses
A CBDC is digital money issued by a central bank. The digital rupee is sovereign currency, unlike a privately issued cryptocurrency. According to central-bank material, the retail digital rupee can be converted into bank deposits. In practice, a holder can exchange it for an equivalent value in a bank account.
The government announced a digital-rupee-based direct-benefit-transfer programme for Chandigarh and Dadra and Nagar Haveli under the Pradhan Mantri Garib Kalyan Anna Yojana, scheduled to begin Aug. 14. Malhotra said CBDC pilots were also exploring targeted government transfers and other uses, including officer reimbursements and gig-worker loans.
Malhotra has said India’s domestic payments are already fast and inexpensive, while cross-border payments remain more difficult. That is the RBI’s reason for exploring alternatives. It does not mean private crypto has no other potential uses, or that existing payment systems solve every domestic payment problem.
Cross-border payments remain a work in progress
The RBI has pointed to CBDCs and links between regulated payment systems as possible ways to improve international transfers. India and Russia began discussing CBDC-based trade-settlement infrastructure in September. Those discussions have not produced a working cross-border system, and no operational results have been described.
Government data published in July said UPI was operating in Singapore, France, the UAE, Nepal and Mauritius. The available details do not specify the type or scope of each arrangement. The list does not mean every market has the same payment link or capabilities.
Crypto rules without one comprehensive framework
In the reported status snapshot, India’s caution did not amount to a comprehensive prohibition. Crypto activity remains subject to existing tax, anti-money-laundering and reporting requirements, but those rules do not form one comprehensive framework for the entire digital-asset market.
Since March 2023, covered virtual digital asset (VDA) activities have fallen under the Prevention of Money Laundering Act. Providers carrying out covered services, such as exchanging or transferring VDAs, providing custody or offering related financial services, must register with the Financial Intelligence Unit-India (FIU-IND) when the rules apply. FIU-IND says the obligations depend on services offered in India, not on whether a provider has a local physical office.
In September, FIU-IND issued notices to 15 virtual-asset providers over registration requirements. Named platforms included Weex, Blofin, DigiFinex, WOO X, WhiteBIT and ChangeNow. The enforcement action included requests to take down applications and URLs accessible to Indian users. The notices and requests do not establish how the platforms responded or the final outcome of enforcement.
The Income Tax Act, 2025, effective April 1, 2026, explicitly defines VDAs, including cryptocurrencies and tokenized assets. A tax definition does not mean every asset is an approved investment product, and it does not guarantee investors protection against loss. The rules cited here impose tax and compliance obligations. They are not a broad assurance that crypto investments are regulated like conventional securities.
Internal government documents were reportedly described as showing a policy direction “leaning toward prohibition.” That phrase points to a reported policy preference, not an enacted ban or final legislative decision. The available information gives no timetable for a broader law.
The timeline has a limit, too: the reported status is dated Oct. 4, but the year is not specified. Dates such as Aug. 14, Sept. 10 and Oct. 3 are therefore retained without assigning a year. The legal snapshot should not be read as a current update.
Key questions and answers
-
Does the RBI support crypto?
It remains cautious about private cryptocurrencies but supports regulated uses of DLT and tokenization.
-
Are tokenized bonds cryptocurrencies?
No. The cited pilots involve conventional securities. Tokenization changes how records or settlement are handled, but does not automatically change a bond’s rights.
-
Has India banned crypto?
No comprehensive ban was reported in the Oct. 4 snapshot. Crypto-related activities remain subject to applicable tax and anti-money-laundering rules.
-
What is the digital rupee being tested for?
Reported uses include targeted benefit transfers and settlement for tokenized securities. CBDC-based cross-border settlement is still under discussion.
-
What did FIU-IND do to 15 platforms?
It issued notices over registration requirements and sought takedowns of applications and URLs accessible to Indian users. The final outcomes are not specified.
India is drawing a line between the machinery of digital finance and who controls the money moving through it. The RBI is willing to test new rails inside regulated systems, while the future legal status of private crypto remains unsettled. This approach may preserve monetary control, but businesses and users still face uncertainty over where regulators will draw the line.
