Deputy Governor T. Rabi Sankar said a CBDC would reduce the use of cash and protect citizens from the volatility of cryptocurrencies.
RBI's circular comes as Indian banks warn customers against using their services for crypto trading.
Reserve Bank of India Governor Shaktikanta Das said he expects the government to "take a call" on cryptocurrencies.
Both nations hope to prevent banks from providing services to crypto companies.
India's crypto industry shows potential, but it continues to be held back by a lack of regulatory clarity, particularly around exchange-banking relationships.
An only-partial court victory and the possibility of legislation banning crypto mean the industry’s legal status in India remains vulnerable.
With India's Supreme Court overturning a ban on cryptocurrencies, the blockchain industry has a large new resource of customers and developers.
Indian Supreme Court’s decision to lift the central bank’s ban on cryptocurrency trading could soon translate into notable growth in trading volumes, according to cryptocurrency exchanges in the country.
Mumbai-based CoinDCX became the first platform in India to fully integrate bank account transfers.
Indian regulators' clampdown on crypto firms is forcing exchange Unocoin to experiment with ATMs and stablecoins to continue receiving fiat deposits.
India's central bank has formed a new unit within the organization to tackle research and regulatory frameworks for blockchain and cryptocurrency.
A Supreme Court decision on the Reserve Bank of India's efforts to bar crypto firms from receiving banking services has been pushed to September.
The RBI has responded to a query about why it moved to block banks from dealing with crypto businesses earlier this year.
The Supreme Court of India has decided to hear crypto-related cases with respect to the news from RBI stopping banks from dealing with cryptos.
The High Court of Delhi has recognized a petition over the Reserve Bank of India's ban on banks engaging with cryptocurrency services.