RBI urges Parliament to shield banks from crypto payments tied to gambling risks

India’s central bank has revived a policy push to isolate the banking system from cryptocurrencies and privately issued stablecoins, placing banking safety at the centre of the next phase of digital asset regulation. Top officials, including Deputy Governor Rohit Jain and Executive Director P. Vasudevan, recently presented the RBI’s position to the Parliamentary Standing Committee on Finance during its study of virtual digital assets. In a background note submitted to the panel, the RBI recommended banning the use of crypto assets for payments and settlements and restricting the banking sector’s exposure to digital assets and private stablecoins. The central bank argued that a calibrated containment strategy leaning towards prohibition would help ring-fence the financial system by preventing crypto use in payments, limiting systemic linkages and keeping banks insulated from contagion risks.

The RBI further warned that applying conventional financial-sector rules to crypto could unintentionally legitimise speculative assets and give users the false impression that these products are safe and officially endorsed. Instead, it advised lawmakers to consider explicit legal separation between the banking system and crypto markets, so that banks and regulated financial institutions are not permitted to hold, trade or take exposure to crypto assets or privately issued stablecoins. This stance revives elements of the central bank’s earlier efforts to curb crypto-banking ties, while operating within the post-2020 legal environment where the Supreme Court has overturned its previous banking circular.

Alongside systemic risk arguments, the RBI’s latest push draws heavily on domestic findings about how crypto is used in practice. Data from the Financial Intelligence Unit (FIU) for the 2024–25 financial year shows that 49 cryptocurrency exchanges were registered with the agency, with reported transactions repeatedly linked to scams, online fraud, illegal gambling networks, unaccounted money transfers and peer‑to‑peer abuse. On this basis, the central bank has told lawmakers that banning some crypto activities remains an active policy option, and that banks should stay away from crypto‑related businesses despite the existence of tax and reporting frameworks.

The RBI’s written and oral submissions also emphasise that cryptocurrencies should not be used for payments, even as India maintains a 30% tax on profits from digital asset trading and a 1% tax deducted at source (TDS) on each transaction. In the iGaming context, this directly touches offshore betting operators and casino sites that rely on cryptocurrencies or private stablecoins to move funds in and out of India. While crypto trading itself remains legal and digital assets are not recognised as legal tender, the proposed policy line would keep gambling‑related crypto flows firmly outside regulated banking and payment channels.

For Indian users who currently fund betting wallets via crypto, this means a sharper divide between formal bank rails and unregulated digital asset pathways. The FIU’s earlier move to require reporting of large over‑the‑counter crypto deals over $10,000 underlines a broader tightening of oversight, but the RBI’s latest stance goes further by seeking structural separation. In practical terms, banks would be expected to avoid servicing businesses that intermediate gambling or betting payments through crypto, and payment systems would be steered away from providing gateways that could bridge rupee balances and digital asset wagers.

Despite its tough line on crypto payments, the RBI has been careful to draw a distinction between speculative digital assets and regulated tokenized financial products. In its background note to the parliamentary committee, the central bank asked policymakers to clearly separate cryptocurrencies from tokenized instruments such as government securities and corporate bonds, so that the tokenization industry is not held back by restrictions aimed at crypto. It supports blockchain‑based tokenization within regulated markets, even as it frames privately issued stablecoins and unregulated tokens as sources of monetary and payment risk.

From an iGaming and payments perspective, this split is significant. Traditional banking products and regulated tokenized assets could continue to operate as part of mainstream financial channels, while crypto‑denominated gambling payments would be pushed further to the margins. Parliament’s forthcoming report on virtual digital assets, due in the monsoon session, will determine how far these recommendations are translated into statute and whether prohibition of crypto in payments becomes a formal legal norm.

For now, the message from the central bank is unambiguous: ring‑fence banks and payment systems from crypto exposure, keep privately issued stablecoins out of regulated financial channels, and treat gambling‑linked crypto activity as a risk factor rather than an innovation to be integrated. Indian users weighing whether to move betting balances via crypto or via rupee‑based systems face a more polarised landscape, where regulated channels are clearly favoured for compliance and transparency, and crypto pathways are increasingly treated as separate and higher risk.