The RBI warns stablecoins threaten monetary sovereignty as tax data shows fewer than 25% of crypto traders declared transactions. New FIU rules target offshore exchanges.
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India is not softening its stance on digital assets. The Reserve Bank of India has reiterated its recommendation for restrictions on cryptocurrencies and stablecoins, according to internal government papers reviewed by Reuters.
The RBI wants financial institutions to keep their distance from digital assets. Officials believe barring banks and other regulated entities from direct exposure would prevent financial contagion within the banking system. The documents also flagged private stablecoins as a risk to monetary stability.
Foreign-currency-backed stablecoins threaten India's monetary sovereignty, the RBI said, because they create external financial dependence. Rupee-backed stablecoins, the central bank argued, could reduce government revenue from the traditional issuance of currency. The latest guidance closely mirrors what the RBI told the Parliamentary Standing Committee on Finance in May.
Tax compliance remains a separate headache. India's income tax department has struggled to detect unreported crypto activity. Internal documents show that less than a quarter of roughly 645,000 cryptocurrency traders declared their qualifying transactions for the financial year ending March 2023.
Officials blamed offshore exchanges, personal wallets, and peer-to-peer transactions for the gap. Those channels make it hard to identify beneficial owners and collect taxes. Starting January 2026, the Financial Intelligence Unit will require exchanges to retain data on transactions above $10,000, including beneficial ownership, funding source, and destination wallet.
India still lacks a comprehensive crypto law. Different government agencies continue debating long-term policy. The Ministry of Corporate Affairs is also considering accounting standards for virtual digital assets. Despite the regulatory fog, India remains one of the world's largest crypto markets. Official estimates show roughly 39 million people in the country owned $2.1 billion in digital assets as of the end of May.
The RBI's position and the tax gap together create a difficult environment for traders and exchanges. Offshore platforms face scrutiny, onshore ones face compliance costs, and the government collects far less revenue than the activity suggests.
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