India's central bank pushes prohibition stance on crypto again
Regulation & Gov ·
Internal government documents show the Reserve Bank of India continuing to favor an outright ban rather than regulation of digital assets.
According to internal government paperwork reviewed by Reuters, the Reserve Bank of India has once more signaled backing for a policy tilted toward prohibiting cryptocurrencies, as CryptoPotato reports. The central bank's position rests on worries about financial stability, protecting monetary sovereignty, and the growing footprint of privately issued stablecoins. Its recommendation would keep banks and other financial institutions from holding, trading, or otherwise gaining exposure to crypto assets, including dollar-pegged tokens like USDT and USDC.
The reasoning centers on separating digital assets entirely from regulated finance rather than folding them into a supervised framework. Officials view a prohibition as a way to contain risk rather than manage it through oversight, and stablecoins draw particular scrutiny: foreign currency-linked tokens are seen as a threat to India's monetary sovereignty, while a rupee-backed stablecoin could erode the government's seigniorage income and add stress to the financial system during downturns. The same regulatory push has been described separately as an effort to bar financial institutions from crypto exposure, according to related reporting, including coverage from The Block.
Despite this stance, India has not imposed a formal ban on crypto trading. The market instead sits in an unresolved regulatory space, with major lenders already steering clear of direct crypto dealings after repeated cautionary signals from the RBI, even absent any explicit legal prohibition.
Adding to the regulatory pressure, the country's tax department separately flagged enforcement difficulties tied to crypto activity. Officials said tracking transactions has grown harder, particularly when they run through offshore exchanges, peer-to-peer rupee trades, or private self-custody wallets that fall outside conventional oversight. Data cited in the report showed that of 645,000 individuals who conducted crypto transactions in 2023, fewer than a quarter declared them on tax filings, even though India applies a 30% tax rate to crypto gains. Tax officials attributed the compliance gap to overseas platforms, inconsistent valuation methods, and unclear ownership records. Additional detail on the RBI's position has also circulated via WuBlockchain's reporting.
What remains unclear is whether the RBI's renewed advocacy will translate into formal legislation or continue as an unofficial deterrent enforced through bank caution. Also unresolved is how authorities plan to close the tax-reporting gap given the cited difficulties in tracing offshore and wallet-based transactions, and whether any near-term policy action will follow the internal documents' recommendations.