India's RBI Renews Anti-Crypto Push as Tax Gaps Persist

Separate findings from India's tax department indicate that cryptocurrency tax compliance remains limited despite existing reporting requirements. Documents reviewed by Reuters show that fewer than one quarter of the 645,000 individuals who carried out cryptocurrency transactions during the financial year ending March 2023 disclosed those transactions in their income tax returns. The department said overseas exchanges, private wallets and rupee-denominated peer-to-peer transactions make it harder to identify beneficial owners and recover taxes. It also warned that sharp price swings and the lack of uniform valuation standards complicate the assessment of digital assets for tax purposes.

Even as the government has not introduced a comprehensive crypto law, regulatory scrutiny has continued through other channels. Last month, India's Financial Intelligence Unit instructed several major crypto exchanges to preserve records of over-the-counter cryptocurrency transactions exceeding $10,000 from January 2026 onward. The request focused on beneficial ownership, source of funds, and destination wallets as authorities intensified anti-money laundering oversight.

India has operated without a dedicated cryptocurrency law since the Supreme Court struck down the RBI's 2018 banking restrictions in 2020. A draft bill proposing a ban on private cryptocurrencies was prepared in 2021 but was never introduced in Parliament. A long-awaited government discussion paper has been postponed multiple times. The finance ministry concluded after consultations with the RBI last September that existing tax and other laws had helped contain risks associated with virtual digital assets. The latest documents reviewed by Reuters show that authorities remain concerned about financial stability as cryptocurrency trading continues without a dedicated regulatory framework.

The practical risk for crypto users and exchanges in India is not a sudden ban but a slow tightening of financial infrastructure. The RBI's stance pressures banks to avoid crypto-related accounts, limiting on-ramps for users. The FIU's recordkeeping requirements add compliance costs. Tax enforcement gaps create uncertainty about future penalties or retroactive assessments. Each of these pushes activity further toward offshore exchanges and private wallets, which in turn makes tax recovery harder – a self-reinforcing cycle.

The scale of India's crypto market is large despite the uncertainty. Reuters cited tax department estimates showing nearly 39 million Indians held about $2.1 billion worth of digital assets at the end of May. The Ministry of Corporate Affairs is examining accounting standards and other guidance for virtual digital assets as policy discussions continue.

The government's discussion paper on crypto policy remains unfinished. The next concrete enforcement milestone is the FIU's OTC recordkeeping rule, set to take effect in January 2026.