India Central Bank is Backing Nationwide Crypto Ban

The Reserve Bank of India (RBI) is once again pressing for a sweeping ban on digital assets, according to internal government documents reviewed by Reuters. The central bank is continuing to push for a policy "leaning toward prohibition," with the country's tax department raising serious compliance gaps.

RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented the bank's position to the Parliamentary Standing Committee on Finance on July 2, at the committee's seventh meeting on virtual digital assets. The RBI stated that "prohibition remains one of the recognised policy options under international standard-setting frameworks and continues to merit careful consideration."

Banks and Stablecoins in the Crosshairs

The RBI has long maintained that banks and financial institutions should be barred from holding, trading, or offering any exposure to crypto assets and privately issued stablecoins, to prevent contagion risks to the broader financial system. The central bank is also averse to rupee-pegged stablecoins, not just dollar-pegged tokens, warning that they could erode seigniorage and create stress points during periods of market turbulence.

The RBI cautioned that applying conventional regulation to crypto could legitimise speculative products with "no beneficial economic impact" and create a "false perception of safety" among users. Tax officials noted the underreporting of crypto gains and the difficulty of tracking offshore and peer-to-peer transactions, while policymakers warned that crypto could worsen capital outflows and India's external deficit.

Millions of Investors, Mounting Tension

The position persists despite India having nearly 39 million crypto investors out of a population of almost 1.5 billion, holding roughly $2.1 billion in digital assets as of May. Tax compliance remains a central friction point. India levies a 30 percent capital gains tax on each crypto sale and clips 1 percent at source from every trade, a regime critics argue has driven activity offshore.

Indian crypto investors have been operating in a regulatory grey zone since the Supreme Court struck down the RBI's 2018 ban. The sector is neither outright illegal nor clearly regulated, and a 2021 draft bill to ban private cryptocurrencies was never presented, with policy discussions repeatedly delayed. What has changed is the tone inside key agencies, shifting from cautious openness to a harder stance.

The RBI urged policymakers to strengthen sovereign digital payment infrastructure through its central bank digital currency (CBDC), the digital rupee, positioning the state-controlled instrument as its preferred alternative to private crypto.

Sources:
CoinDesk: Reserve Bank of India Still Favors Crypto Prohibition
CoinPaprika: RBI Pushes to Seal India's Banks Off From Crypto
Crypto Daily: RBI Keeps a Crypto Ban on the Table