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India Central Bank Backs Crypto Ban; Tax Department Flags Risks
RBI wants banks barred from crypto exposure. Tax dept says offshore trading and private wallets complicate compliance. 39M traders hold $2.1B in assets.
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India's central bank has renewed its push for a crypto policy that leans toward prohibition. The Reserve Bank of India wants banks and financial institutions barred from holding, trading, or gaining exposure to crypto assets and privately issued stablecoins, according to government documents reviewed by CoinPaper.
The tax department separately warned that offshore exchanges, private wallets, and peer-to-peer trades make crypto tax compliance harder to track. Fewer than a quarter of 645,000 individuals who made crypto transactions in the financial year ending March 2023 reported them on tax returns, the documents show.
India has roughly 39 million crypto traders holding about $2.1 billion in digital assets, per tax department estimates. The country has not adopted a final crypto policy, leaving digital assets in a legal grey zone since a court struck down earlier RBI restrictions that had effectively blocked banks from serving crypto businesses.
What the RBI Wants
The RBI said banks should be blocked from holding or trading crypto assets and from gaining exposure to privately issued stablecoins. A source familiar with the central bank's thinking said the RBI wants crypto kept outside the regulated financial system. That position would limit direct links between crypto markets and banks.
At present, Indian banks are not legally prohibited from dealing with crypto. Major lenders have largely avoided the sector after repeated warnings from the central bank.
The RBI also raised concerns about stablecoins. Foreign-currency stablecoins could pose risks to domestic monetary sovereignty, the central bank said. Rupee-backed tokens could reduce government income from issuing fiat currency. Stablecoins may add pressure during periods of market stress, the RBI warned.
The documents said stablecoins could make crypto gains harder to detect and tax. If traders can remain inside crypto markets without converting assets into fiat currency, authorities may find it harder to track taxable profits.