Promote the technology, guard the money: India's approach to digital assets.

New Delhi, Oct 3: Reserve Bank of India Governor Sanjay Malhotra said on Saturday that India has taken a careful stance on cryptocurrencies while encouraging the technologies that power them, such as distributed ledger technology and tokenisation.

Speaking at the Kautilya Economic Conclave, Malhotra explained that the country backs innovation in these underlying technologies but remains wary of crypto assets because of risks to monetary sovereignty, monetary policy and capital flows.

"Our approach has been to promote the underlying technologies, and we are using some of these in the central bank and outside in PPP (public-private partnership) mode. But when it comes to crypto, we have been cautious," he said.

The Governor said the concern is tied to the "singleness of money" and the possible impact on monetary policy, especially in emerging market economies that have capital flow restrictions.

He noted that the issue crypto seeks to solve is not mainly domestic payments, since these are already fast, cheap and convenient in India and many other countries. The bigger problem, he said, lies in cross-border payments, where alternatives such as central bank digital currencies (CBDCs) could be explored.

Turning to rising public debt and firming bond yields worldwide, Malhotra said yields are essentially driven by demand and supply. Spending by both governments and private companies has gone up, partly because of artificial intelligence, making money scarcer and pushing yields and debt costs higher.

He added that the RBI's monetary policy is chiefly guided by domestic growth and inflation conditions. However, global interest rates also affect India, including through their influence on the country's real interest rates, and that is something the central bank must keep in view.