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RBI Governor Malhotra steers India's ledger work toward tokenized bonds and away from crypto
RBI Governor Sanjay Malhotra said on Oct. 3 that India stays cautious on crypto, weeks after India's FIU sent AML notices to 15 platforms. Firms with Indian users should plan for tax and AML enforcement as the working regime while the RBI builds digital-rupee settlement for tokenized bonds.
The Investor · Invest desk
What happened
- SEBI launched its Demat 2.0 pilot for tokenized corporate bonds on Sept. 10, keeping securities records on a distributed ledger and settling the cash side in central bank money.
- India has enacted neither a crypto prohibition nor a dedicated digital asset law as of Oct. 4, so trading continues under existing tax, anti-money-laundering and reporting rules.
- Malhotra disputed that India needs private cryptocurrencies for domestic payments, saying its existing rails are fast and cheap and that cross-border transfers are the harder problem.
- He pointed to central bank digital currencies and links between regulated payment systems as a route for those international transfers.
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Why it matters
- constraint If the July recommendations become policy, platforms serving rupee users cannot route stablecoin liquidity through regulated Indian banks or financial institutions.
- decision Firms with Indian users have to fund AML reporting to the FIU's standard now, because the unit is enforcing existing rules without waiting for a crypto statute.
- capability Bond issuers and banks have a live route to put corporate debt on a ledger with cash settled in central bank money, the tokenization channel the RBI and SEBI are building themselves.
Malhotra's objection to private crypto rests on what central bankers call the singleness of money. Every form of money denominated in one currency should hold the same value and stay interchangeable [3]. According to the governor, a private token whose value, backing or settlement differs from sovereign money breaks that. He tied the risk to monetary policy and to capital-flow management in emerging economies that control cross-border movements [15]. His prepared address listed tokenization and artificial intelligence among technologies that can improve efficiency, provided they preserve settlement finality, financial integrity and that same singleness [13].
"So, our approach has been to promote the underlying technologies," Malhotra said, referring to distributed ledgers and tokenization [2]. He added that the central bank already uses some of that technology internally and through public-private partnerships, while its approach to crypto remains "cautious" [14]. The project list matches the sentence. The RBI has issued tokenized certificates of deposit through its Unified Markets Interface to study digital settlement [10]. In September Malhotra outlined programmable CBDC work alongside corporate bonds settled in wholesale digital rupee [9]. According to crypto.news, India's first tokenized bond transactions settled in digital rupee came to Rs 1,025 crore, or 10.25 billion rupees [12][1].
For private money, the reported plan points the other way. Internal documents reported in July showed the central bank favoring a direction "leaning toward prohibition" [6]. Officials reportedly recommended insulating regulated banks and financial institutions from holdings, trading and other exposure to crypto and privately issued stablecoins [6]. A platform hoping to move rupee liquidity through a bank-issued stablecoin is dealing with a central bank whose own bond settlement pilot runs on the digital rupee [9].
The record supports three paths. The government could write the July lean into a prohibition statute [6]. A licensing law that admits exchanges to a regulated perimeter is the second. The third is the present arrangement left in place, with the Financial Intelligence Unit and the tax code doing the regulating [7].
I'd plan around the third. The FIU's September notices to 15 platforms were for breaches of anti-money-laundering requirements already in force [8][7]. So the state has shown it can act against platforms without new legislation. The case against that view is that the RBI recommends and the government legislates [6][7]. The prohibition lean came from internal documents, and a government that has declined to legislate in one direction can still choose the other. What would prove the plan wrong is RBI permission for banks to hold or trade privately issued stablecoins, the exposure its officials reportedly recommended against [6].
What to watch
- Whether the government introduces a dedicated digital asset bill, and whether it follows the RBI's reported prohibition lean or a licensing model.
- What the FIU does next with the 15 platforms that received September notices, including any penalties or access restrictions.
- Whether SEBI's Demat 2.0 pilot moves to regular issuance and digital-rupee bond settlement grows past its first transactions.