India's cryptocurrency policy debate has entered a new phase after newly disclosed government documents showed the Reserve Bank of India (RBI) continues to support restrictions on digital assets instead of broader regulation. Reuters reported that the central bank wants regulated financial institutions blocked from holding, trading, or gaining exposure to cryptocurrencies and privately issued stablecoins.
Meanwhile, tax authorities warned that offshore trading platforms complicate tax enforcement and reduce compliance. The documents also revealed that policymakers have not reached a unified position on the country's long-delayed crypto framework. As digital asset ownership grows across India, regulators continue weighing financial stability, tax enforcement, and market oversight.
According to the documents reviewed by Reuters, the RBI believes cryptocurrencies and privately issued stablecoins pose risks to financial stability, monetary sovereignty, and wider financial markets. As a result, the central bank favors preventing banks and other regulated financial institutions from holding digital assets or offering direct exposure to them.
Meanwhile, India continues without dedicated cryptocurrency legislation despite years of policy discussions. Digital assets remain legal to own and trade after the Supreme Court overturned an earlier banking restriction in 2020.
Besides, the latest documents indicate that regulators have become increasingly concerned as cryptocurrency adoption continues to expand across the country. Reported estimates showed that nearly 39 million Indians held about $2.1 billion in digital assets at the end of May, placing India among the world's largest retail cryptocurrency markets.
India's latest policy discussions contrast with regulatory developments in several major financial markets. For example, Japan continues expanding its regulated stablecoin ecosystem through new blockchain financial services and retail payment initiatives instead of limiting digital asset integration.
Similarly, the European Commission is preparing revisions to its Markets in Crypto-Assets framework to support tokenization and emerging blockchain applications. Likewise, lawmakers in the United States continue negotiating the CLARITY Act, which seeks to establish a comprehensive federal market structure for digital assets rather than relying mainly on enforcement actions.
Consequently, many leading economies now focus on refining cryptocurrency regulation instead of excluding digital assets from regulated financial systems.
Read More: India Doesn't Need a Crypto Ban; it Needs a Crypto Policy
Besides financial stability concerns, India's tax authorities also identified significant compliance challenges involving cryptocurrency transactions. According to the documents, fewer than one-quarter of roughly 645,000 individuals who traded cryptocurrencies during the financial year ending March 2023 reported those activities on income tax returns.
Officials reportedly found that offshore exchanges, private wallets, and peer-to-peer transactions make it harder to identify beneficial owners and calculate taxable gains. India currently imposes a 30% tax on cryptocurrency profits alongside a 1% tax deducted at source on many digital asset transactions.
Meanwhile, the documents also revealed differing views within government institutions. Previous discussions reportedly showed the Finance Ministry favored limited regulatory clarity supported by existing tax laws, while the RBI consistently supported keeping cryptocurrencies outside the regulated financial system.
Although the documents do not signal an official government decision to prohibit cryptocurrencies, they show that India's principal financial authorities continue debating how to balance innovation, consumer protection, monetary stability, and effective tax enforcement while lawmakers consider future legislation.
India's cryptocurrency policy remains unsettled as the Reserve Bank of India advocates tighter banking restrictions while tax authorities raise compliance concerns. Meanwhile, policymakers continue weighing financial stability against regulatory clarity, leaving the country's future crypto framework under active discussion.