India's RBI warns crypto threatens stability, citing illicit finance

The Reserve Bank of India told a parliamentary committee this week that cryptocurrencies threaten the country's financial stability. The central bank argued that virtual digital assets (VDAs) like Bitcoin [BTC] operate outside the banking system, making them difficult to supervise.

The RBI said many trading platforms and service providers are based abroad, beyond the reach of Indian regulators. That structure lends itself to money laundering and terrorist financing. The central bank pointed to China and Qatar as jurisdictions that have banned crypto outright. It noted that even European authorities allow digital assets only under strict rules.

The Institute of Chartered Accountants of India (ICAI) took a different position during the same meeting. The ICAI advocated for a detailed legal framework rather than a ban. It said it could help develop accounting standards, financial reporting principles, and compliance guidelines for VDAs. The institute proposed researching the economic characteristics of different asset types and creating guidance on recognition, measurement, presentation, and disclosure in financial statements.

The committee did not announce any new regulatory action. The meeting showed the government faces competing pressures, between the RBI's security concerns and the ICAI's call for a regulatory framework.

India taxes crypto gains at 30% and levies 1% on each transaction, yet it has never granted the asset class legal status. That dual approach remains unchanged after the Union Budget 2026, which introduced penalties for firms that fail to report crypto trades to tax authorities. The contradiction between tax and legal status leaves market participants in a gray zone. AMBCrypto covered the compliance rule shift earlier this month.