RBI Revives Push to Isolate Indian Banks From Crypto
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- Reserve Bank of India has a reported new proposal to cut regulated financial institutions off from crypto dealings, echoing the 2018 circular the Supreme Court struck down in March 2020.
- India ranked first in Chainalysis' 2025 Global Crypto Adoption Index, even as the RBI reportedly challenged the methodology behind private-sector adoption rankings.
- The 2018 RBI circular effectively severed crypto exchanges from India's banking system without banning individual ownership, but the Supreme Court found the RBI hadn't demonstrated harm to entities it regulated.
- The March 2020 Supreme Court ruling followed a challenge by crypto exchanges and the Internet Mobile Association of India; the court recognized the RBI's preventive-action authority but ruled the measure failed the proportionality test.
- In May 2021, the RBI clarified banks could no longer cite the invalidated circular when cautioning customers against crypto transactions, while keeping KYC, AML, and foreign-exchange compliance requirements in place.
Why it matters: The RBI is targeting the banking rails crypto exchanges rely on, even though India leads Chainalysis' 2025 Global Adoption Index and the Supreme Court already ruled this exact 2018 approach disproportionate. Reimplementation would functionally cut exchanges off from banking access without banning retail ownership, reigniting a proportionality fight the central bank previously lost.
