CoinDesk
India's central bank is continuing to push for a policy that "leans toward prohibition" of crypto, while the country's tax department is raising alarms over compliance gaps that let the bulk of digital-asset gains go unreported, according to government documents reviewed by Reuters.
The Reserve Bank of India wants banks and financial institutions barred from holding, trading, or offering any exposure to crypto assets and privately issued stablecoins, citing contagion risks to the broader financial system. The RBI is also opposing rupee-pegged stablecoins, not just dollar-pegged tokens, warning they could erode seigniorage and create stress points during market turbulence.
Why it matters
India sits on an unusual contradiction: nearly 39 million crypto investors hold roughly $2.1 billion in digital assets as of May, yet key agencies remain firmly opposed. In the financial year ended March 2023, fewer than a quarter of the 645,000 individuals who transacted in crypto actually declared those gains on tax returns. Transactions on offshore exchanges and peer-to-peer platforms, especially those settled in rupees, remain difficult to track, trace and tax.
Indian crypto investors have been operating in a regulatory grey zone since the Supreme Court struck down the RBI's 2018 ban. A 2021 draft bill to ban private cryptocurrencies was never presented and policy talks have been repeatedly delayed, but the latest internal documents show key agencies are still not ready to embrace digital assets.
Market impact
India's reluctance is partly structural. Heavy dependence on energy imports and persistent current account deficits leave the rupee exposed, and authorities worry widespread crypto adoption could accelerate capital outflows and worsen the external deficit. The pressure on the central bank to act is real, but so is the size of the domestic user base, leaving policy stuck between prohibition and recognition.
Frequently asked questions
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Why does the Reserve Bank of India want to ban crypto?
The RBI wants banks and financial institutions barred from holding, trading, or offering exposure to crypto and privately issued stablecoins, citing contagion risks, loss of seigniorage from rupee-pegged stablecoins, and stress during market turbulence.
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How many Indians hold crypto despite the regulatory uncertainty?
Nearly 39 million crypto investors in India hold roughly $2.1 billion in digital assets as of May, operating in a grey zone since the Supreme Court struck down the RBI's 2018 ban.
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How serious is the crypto tax evasion problem in India?
In the financial year ended March 2023, fewer than a quarter of the 645,000 individuals who transacted in crypto actually declared those gains on their tax returns, with offshore exchange and peer-to-peer rupee transactions especially hard to track.
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Does the RBI oppose rupee-pegged stablecoins as well as dollar-pegged ones?
Yes. The RBI has warned specifically that rupee-pegged stablecoins could erode seigniorage and create stress points during market turbulence, extending its caution beyond dollar-denominated tokens.
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What structural factors keep India hostile to crypto adoption?
India's heavy dependence on energy imports and persistent current account deficits make the rupee vulnerable, and authorities fear widespread crypto adoption could accelerate capital outflows and worsen the external deficit.
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