India's RBI Pushes for Crypto Prohibition, Documents Show

India's Reserve Bank of India is pushing for a crypto prohibition, internal government documents show. The central bank wants banks and financial institutions barred from gaining exposure to cryptocurrencies and privately issued stablecoins.

The RBI argued that allowing regulated lenders to interact with crypto could bring chaos to the formal financial system and increase contagion risks, Reuters reported. The central bank also views foreign currency-backed stablecoins as a threat to monetary sovereignty. Even rupee-backed tokens face resistance over concerns they could reduce the government's income from issuing fiat currency.

The push for stricter rules comes alongside enforcement gaps. Tax department officials said fewer than a quarter of the 645,000 crypto transaction participants in FY2023 reported their holdings in tax returns. Offshore exchanges and peer-to-peer rupee trades make it difficult to identify beneficiaries, officials said. India taxes crypto gains at 30%. The tax department flagged wild swings in asset values and the lack of uniform valuation standards as challenges.

India has nearly 39 million crypto traders holding roughly $2.1 billion in digital assets, according to tax department estimates. The country has kept crypto in a legal grey zone for years. A 2021 draft bill to ban private cryptocurrencies was never introduced. A formal government discussion paper has been delayed.

The U.S. reaffirmed its commitment to the industry, with the CLARITY Act moving to Senate consideration. Japan and Singapore have built regulatory frameworks. Indian exchanges and Web3 startups operate under the same policy uncertainty that has defined the market since the 2021 draft bill stalled.