India's central bank has reasserted its call to bar banks and financial institutions from cryptocurrency and privately issued stablecoins, according to internal government documents from May and June reviewed by Reuters. The Reserve Bank of India remains "leaning towards prohibition," Reuters reported, though no formal policy has been adopted.
The RBI's stated concerns are specific. Foreign-currency-backed stablecoins threaten domestic monetary sovereignty. Rupee-backed tokens could erode government revenue from currency issuance and create financial-stability risks during market stress. Wider stablecoin use would also make crypto gains harder to tax, since holders would need less incentive to convert into rupees to spend their holdings, the central bank reportedly argued.
India's current crypto enforcement already leans restrictive. Major banks have largely steered clear of the sector after repeated RBI warnings, even though no formal prohibition exists. The central bank's tax department, which taxes crypto gains at 30%, has separately flagged compliance failures. Of roughly 645,000 people with crypto transactions in the year ending March 2023, less than a quarter actually declared those gains on their tax returns, according to Reuters's reporting of agency data. Transactions routed through offshore exchanges, private wallets, and rupee-based peer-to-peer networks make it hard to identify holders and collect taxes owed.
India's crypto market has operated in legal limbo since 2018, when the Supreme Court struck down an earlier RBI-driven outright ban. A 2021 legislative proposal to outlaw private cryptocurrencies never reached parliament, and government deliberation has stalled repeatedly. In September, Reuters reported that India's finance ministry had backed minimal crypto rules, arguing existing tax and anti-money-laundering laws already contained the asset class's risks.
The renewed RBI push runs counter to global momentum. The United States has moved toward stablecoin legislation, while Japan and Singapore have adopted regulatory regimes rather than bans. China remains among the few major economies to have prohibited crypto outright.
India's crypto user base is substantial. As of May, the country had roughly 39 million crypto traders holding approximately $2.1 billion in digital assets, according to tax department estimates cited by Reuters.