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RBI Governor: support for distributed-ledger technology, caution on crypto
Why in News?
RBI backs the technology but fears the coin: the monetary sovereignty argument GS-III banking answers need
RBI Governor Sanjay Malhotra said India supports innovation in distributed ledger technology and tokenisation but remains wary of cryptocurrencies.
Why it matters: factual, Prelims-type
What you need to know
2 min read
RBI Governor Sanjay Malhotra said India supports innovation in distributed ledger technology and tokenisation but remains wary of cryptocurrencies.
The concerns are monetary sovereignty and capital flows.
Sources: Topper IAS editorial (PIB / The Hindu / Indian Express)
Key facts
Remember these
- RBI Governor Sanjay Malhotra backs distributed ledger technology (DLT) and tokenisation
- RBI remains wary of private cryptocurrencies
- Main concerns: monetary sovereignty and uncontrolled capital flows
- RBI's own digital currency (e-rupee, a CBDC) is the sovereign alternative to private crypto
- Syllabus link: GS-III Banking and financial technology
Prelims · Mains
How the exam will ask it
Prelims
- Distributed ledger technology is the underlying infrastructure of blockchain-based systems, and tokenisation represents assets as digital tokens on such ledgers.
- The RBI regulates money, credit and the payment system in India, and has repeatedly flagged risks from private cryptocurrencies.
- Private cryptocurrencies are not legal tender in India, whereas a central bank digital currency is issued by the central bank.
Mains
GS-III (Economy, Banking and fintech). Issue: private crypto can erode monetary sovereignty and enable capital flows outside the central bank's control, yet DLT and tokenisation promise efficiency. Policy: RBI separates the technology from the asset, backing tokenisation and its own CBDC while staying cautious on crypto. Way forward: a clear regulatory framework, international coordination and safe sandboxes for innovation.
Quick recall
Answer before you reveal
The RBI Governor has said India backs distributed-ledger technology and tokenisation but remains wary of cryptocurrencies. The central bank's main stated concern about them relates to:
- Taxation of agricultural income
- Priority-sector lending targets
- Valuation of gold reserves
- Monetary sovereignty and capital flows
Show answer
Answer: D — The correct answer is Monetary sovereignty and capital flows. The RBI has repeatedly flagged that private cryptocurrencies can erode monetary sovereignty and enable capital flows outside its control, while it supports the underlying technology.
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