- India’s central bank has renewed its call for a cryptocurrency policy that leans toward prohibition.
- Officials are raising concerns over offshore exchanges, stablecoins, tax compliance, and financial stability.
- Despite regulatory uncertainty, India remains one of the world’s largest crypto markets with nearly 39 million traders.
India is once again signaling a tougher stance toward cryptocurrencies, with the Reserve Bank of India (RBI) renewing its preference for policies that lean toward prohibiting digital assets. Internal government documents reviewed by Reuters suggest several key agencies favor stricter controls on cryptocurrencies, even as the government continues delaying a formal regulatory framework.
The latest discussions highlight growing concern among Indian authorities over financial stability, tax enforcement, and the increasing use of offshore crypto platforms by domestic investors.
RBI Pushes for Stronger Restrictions
According to the documents, the RBI continues to argue that cryptocurrencies pose significant risks to India’s financial system. The central bank believes banks and financial institutions should be prohibited from holding, trading, or gaining exposure to cryptocurrencies and privately issued stablecoins.
Officials are particularly concerned that digital assets could weaken monetary sovereignty and increase systemic financial risks if they become more deeply integrated into the country’s regulated financial system.
While India has not formally banned cryptocurrencies, most major banks have avoided offering crypto-related services following repeated warnings from the RBI.
Stablecoins Face Additional Scrutiny
The RBI also expressed concerns about stablecoins, warning that both foreign-backed and rupee-backed tokens could create new risks for the financial system.
According to the central bank, foreign currency-backed stablecoins could threaten India’s monetary sovereignty, while rupee-backed stablecoins could reduce government revenue generated from issuing traditional currency. Regulators also believe stablecoins may make cryptocurrency transactions harder to monitor and tax by reducing the need to convert digital assets into fiat currency.
These concerns come as countries around the world continue developing regulatory frameworks for stablecoins rather than outright banning them.
Tax Authorities Raise Compliance Concerns
India’s tax department has also identified widespread underreporting of cryptocurrency activity. Internal findings showed that fewer than one-quarter of the approximately 645,000 individuals who conducted cryptocurrency transactions during the 2022-2023 financial year reported those activities on their tax returns.
Officials warned that transactions conducted through overseas exchanges, private wallets, and peer-to-peer platforms make it significantly more difficult to identify beneficial owners and collect taxes. India currently imposes a 30% tax on cryptocurrency gains, making enforcement a major priority for regulators.
The tax department also noted that the absence of standardized valuation methods adds another layer of complexity when assessing crypto assets for taxation purposes.
Regulatory Uncertainty Continues
Despite the increasingly cautious tone from regulators, India remains one of the world’s largest cryptocurrency markets. Government estimates suggest nearly 39 million Indians held approximately $2.1 billion worth of digital assets at the end of May.
Unlike countries such as Japan and Singapore, which have adopted comprehensive crypto regulations, India continues operating in a legal gray area following a 2018 court ruling that overturned the RBI’s earlier banking restrictions.
For now, the government has not announced a final policy, but the latest discussions indicate that tighter oversight and stricter regulations remain far more likely than broad deregulation.
