India's government told Parliament on Monday that cryptocurrency poses limited risk to the country's financial stability while accelerating its own digital currency program.
Minister of State for Finance Pankaj Chaudhary answered questions about unregulated cryptocurrency's impact in a response to Rajya Sabha, the upper house of Parliament.
The Reserve Bank of India's December 2024 Financial Stability Report notes linkages between the crypto sector and regulated financial system remain limited at present.
RBI periodically assesses risks and potential impact of crypto assets on financial stability through public communications and Financial Stability Reports.
What Happened
Rajinder Gupta, a member of Rajya Sabha, asked whether the Finance Ministry assessed cryptocurrency risks and what measures India plans for investor protection and technological innovation.
The government confirmed RBI has issued advisories cautioning users, holders and traders about economic, financial, operational, legal and security risks associated with crypto assets.
RBI's May 31, 2021 circular required regulated entities to continue full customer due diligence for crypto assets consistent with Know Your Customer, Anti-Money Laundering and Combating Financing of Terrorism obligations under the Prevention of Money Laundering Act.
The Ministry of Electronics and Information Technology promotes blockchain through the National Blockchain Framework developed by a consortium including the Centre for Development of Advanced Computing, National Informatics Centre, Institute of Development and Research in Banking Technology and academic partners.
The framework focuses on permissioned blockchain-based citizen-centric applications.
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Why It Matters
The parliamentary response confirms India's dual approach of warning against private cryptocurrencies while embracing underlying blockchain technology.
The government emphasized blockchain has independent applications across banking, financial services, real estate, media, supply chain management, counterfeit detection, mobility, health, education and energy.
These opportunities can be harnessed without dealing in crypto assets, according to the official statement.
RBI is accelerating Central Bank Digital Currency adoption with the goal of maintaining public trust in money and striking a balance between innovation and financial stability.
Existing regulators are examining potential applications of the underlying technology including tokenization, programmability and other emerging use cases.
The RBI's Regulatory Sandbox framework promotes testing of use cases using blockchain technologies.
The statement provides no indication of new cryptocurrency regulations or bans despite ongoing concerns about financial risks.
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