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India Shies Away from Full Crypto Regulation, Citing Systemic Risk Concerns

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India is unlikely to adopt a comprehensive legal framework for cryptocurrencies, opting instead for partial oversight to avoid exposing its financial system to systemic risks, according to a government document seen by Reuters.

Key Points from the Document

  • RBI’s stance: The Reserve Bank of India believes regulating cryptocurrencies would effectively grant them legitimacy and could allow the sector to grow into a systemic risk.

  • Legislation status: A 2021 draft bill to ban private cryptocurrencies was never passed. A planned 2024 discussion paper was deferred pending U.S. regulatory clarity.

  • Ban vs. regulation: While a ban could curb speculative risks, it would not eliminate peer-to-peer transfers or trading on decentralized exchanges.

  • Current approach:

    • Global exchanges may operate in India if they register locally and comply with anti–money laundering checks.

    • Punitive taxes discourage speculative activity.

    • Current laws act as a deterrent against fraud and illegal use.

  • Scale of adoption: Indians hold about $4.5 billion in crypto assets, which remains non-systemic for financial stability at present.

Global Context

  • United States: Under President Trump, the U.S. legalized wider use of stablecoins via the GENIUS Act (July 2025).

  • China: Continues to ban cryptocurrencies but is considering a Yuan-backed stablecoin.

  • Japan & Australia: Developing cautious regulatory frameworks without aggressive promotion.

Stablecoin Concerns

  • The document highlights that widespread adoption of dollar-backed stablecoins could:

    • Fragment India’s Unified Payment Interface (UPI) system.

    • Weaken domestic payment infrastructure.

    • Create new risks from liquidity shocks and global market volatility.

Outlook

India’s “wait-and-watch” approach underscores a balancing act: deterring speculative trading without granting legitimacy that could make crypto mainstream. While global peers move toward clearer frameworks, India seems intent on limiting crypto’s footprint in its financial system until international standards stabilize.

Brazil’s Central Bank Tightens Financial System Security After Cyberattacks

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Brazil’s central bank unveiled new rules on Friday to bolster the resilience of the financial system following a wave of cyberattacks targeting financial institutions.

Effective immediately, non-authorized payment institutions connected to the National Financial System Network through IT providers will face a 15,000 reais ($2,767) cap on digital transfers. Central bank Governor Gabriel Galipolo explained that nearly all corporate transfers using Pix or TED already fall below this threshold, meaning the cap will mainly disrupt criminal attempts to move large sums in single operations.

“This measure is aimed at organized crime, not the financial institutions,” Galipolo stressed. By forcing attackers to carry out multiple smaller transactions, the central bank hopes to make illicit activity easier to detect.

In addition, the deadline for unauthorized firms to apply for a banking license has been moved up from December 2029 to May 2026, accelerating regulatory oversight. Going forward, no payment institution will be allowed to operate without prior approval.

Regulation director Gilneu Vivan also announced that long-awaited cryptoasset regulations will be issued later this year, building on a framework approved by Congress in 2022. Officials have raised concerns about the use of stablecoins in illicit financial flows.

Galipolo reassured markets that the banking system remains sound, despite heightened scrutiny. “There is no risk to Brazil’s banking system. The system is stable and there is no threat whatsoever,” he said.

On geopolitical risks, Galipolo called U.S. sanctions against Brazilian Supreme Court Justice Alexandre de Moraes under the Magnitsky Act “unusual.” While he declined to comment on the central bank’s recent decision to block the acquisition of lender Master by BRB due to confidentiality, he noted that all board decisions are taken collectively and based on technical grounds.

The sanctions against Moraes — which freeze his U.S. assets and restrict business with American firms — have sparked questions about potential spillover effects on Brazilian banks with U.S. operations, though the central bank said it is closely monitoring the situation.

Citigroup Explores Stablecoin Custody and Crypto ETF Services Amid Regulatory Shift

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Citigroup (C.N) is evaluating the provision of stablecoin custody and related services, signaling growing interest from traditional financial institutions in the cryptocurrency sector, a senior executive told Reuters. The move comes as recent U.S. legislation paves the way for stablecoins—digital tokens pegged to fiat currencies like the U.S. dollar—to be used more broadly for payments, settlements, and other financial services.

Under the new law, stablecoin issuers must hold safe assets, such as U.S. Treasuries or cash, to back their digital coins. This creates potential opportunities for custody banks to provide safekeeping and administration. “Providing custody services for those high-quality assets backing stablecoins is the first option we are looking at,” said Biswarup Chatterjee, global head of partnerships and innovation for Citigroup’s services division. Citi’s services business, covering treasury, cash management, payments, and corporate services, remains a central unit amid ongoing restructuring.

Currently, roughly $250 billion in stablecoins have been issued, primarily for settling cryptocurrency trades, according to a McKinsey study. Citigroup is also considering custody services for digital assets linked to crypto investment products, such as bitcoin ETFs. For instance, BlackRock’s iShares Bitcoin Trust—the largest bitcoin ETF—has around $90 billion in market capitalization, requiring custody of an equivalent amount of digital currency. Coinbase currently dominates this business, serving as custodian for more than 80% of crypto ETF issuers.

In addition to custody, Citigroup is exploring the use of stablecoins to accelerate payments, which in traditional banking can take several days. Citi already offers “tokenized” U.S. dollar transfers via blockchain across New York, London, and Hong Kong 24/7 and is developing services that allow clients to send stablecoins or convert them to dollars for instant payments.

The regulatory environment under the Trump administration has become more accommodating to crypto expansion, though Citi and other firms must still adhere to anti-money laundering, currency control, and other compliance requirements. Chatterjee emphasized that crypto custody must ensure assets are legitimately sourced and maintain robust cybersecurity and operational safeguards. The issuance of a Citi-backed stablecoin is also under consideration.