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RBI Pushes Crypto Prohibition, 39M Indian Traders at Risk
RBI reiterates crypto ban preference, putting 39M traders' $2.1B at risk. A 2021 Supreme Court ruling overturned a prior ban, complicating a new prohibition.
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India's central bank wants to ban crypto. The Reserve Bank of India, in its June Financial Stability Report, reiterated its preference for a prohibition-leaning policy toward digital assets. The stance could affect roughly 39 million crypto traders in the country holding an estimated $2.1 billion in digital assets, the central bank said.
A 2018 circular from the RBI barred banks from dealing with crypto businesses. The Supreme Court overturned that ban in 2021, ruling it unconstitutional. The court found the ban disproportionate and a violation of the freedom to trade under the constitution. Crypto trading roared back, with volumes surging on domestic exchanges. The government then imposed a 30% tax on gains and a 1% tax deducted at source per transaction.
Tax compliance among crypto traders remains low. Fewer than one in four filed accurately for the fiscal year ending March 2023, according to tax department data. The 1% TDS applies to every sale, meaning traders lose a small percentage of the transaction amount before realizing any profit. That makes frequent trading costly and reduces volumes on Indian exchanges. Many traders shifted to offshore platforms that operate outside Indian jurisdiction, making enforcement difficult.