India eyes RBI-backed digital currency in no-crypto push

India is set to introduce a digital currency backed by the nation’s Reserve Bank as it continues its cautious approach to regulating cryptocurrency.

India has revealed plans to launch a digital currency backed by the Reserve Bank of India (RBI) as part of ongoing efforts to discourage the use of unregulated cryptocurrencies. According to local media on October 7, Union Minister Piyush Goyal recently clarified the nation’s position, stating that the country does not support crypto assets lacking sovereign or asset-based backing.

“We have not been encouraging cryptocurrency, which does not have sovereign backing or which is not backed by assets,” Goyal said.

According to him, the RBI-backed digital currency is meant to streamline financial transactions, reduce the reliance on physical cash, and offer a more traceable and efficient alternative to traditional banking systems.

While the government has not imposed an outright ban on private cryptocurrencies, it has taken steps to make them less attractive through heavy taxation. The minister reiterated this stance, emphasizing that the aggressive taxing policy aims to discourage adoption due to the risks associated with the asset class.

“We are taxing it (cryptocurrency) very heavily,” the Minister stated, adding that the government wants to prevent individuals from holding unbacked digital assets without clear accountability if issues arise.

India’s crypto industry faces cautious policy amid regulatory limbo

Goyal’s comments reinforce the cautious stance long adopted by the Indian government toward the crypto industry. Despite leading global crypto adoption rankings in 2025, India’s policy direction remains unfavourable toward the industry. The Supreme Court overturned the RBI’s crypto banking ban in 2020, but the lack of follow-up regulatory clarity has left the sector in a state of uncertainty.

The central bank maintains its hardline stance, repeatedly warning that private cryptocurrencies could undermine monetary control and destabilize the financial system. Recent reports also allege that India is unlikely to establish full-scale crypto regulations. 

Officials fear that doing so would legitimize the sector and risk systemic exposure. At the same time, they recognize that outright prohibition would likely be ineffective in stopping peer-to-peer and decentralized crypto activity.

Authorities also expressed concern about stablecoins, which they see as a potential threat to the country’s widely used Unified Payments Interface (UPI) and overall payments infrastructure. Nevertheless, foreign exchanges continue to operate in India under strict AML compliance, with high crypto taxes acting as a deterrent to increased activity.