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India’s crypto policy debate has entered a new phase after internal government documents reviewed by Reuters showed the Reserve Bank of India has renewed its support for a policy “leaning towards prohibition,” while the country’s tax department separately raised concerns over underreporting linked to offshore exchanges and private wallets.
The developments come as the Indian government continues to delay a formal policy on virtual digital assets, despite the country being home to nearly 39 million crypto investors holding an estimated $2.1 billion in digital assets.
The internal documents reviewed by Reuters indicate that India’s central bank has once again urged policymakers to adopt an India crypto ban approach, arguing that cryptocurrencies should remain outside the country’s regulated financial system.
According to the documents, the RBI believes banks and other financial institutions should be prohibited from holding, trading, or maintaining exposure to cryptocurrencies and privately issued stablecoins. The central bank argues that limiting links between traditional finance and digital assets would reduce potential contagion risks to the broader financial system.
The documents mark a notable shift in regulatory sentiment. In September last year, India’s finance ministry, following consultations with the RBI, had reportedly supported limited regulatory clarity, suggesting that existing taxation and legal frameworks had helped contain risks associated with virtual digital assets.
However, the latest discussions suggest regulators have become increasingly concerned as cryptocurrency adoption continues without a comprehensive legal framework.
India has operated in a regulatory grey area since 2018, when the country’s Supreme Court struck down earlier RBI restrictions that effectively prevented banks from servicing cryptocurrency businesses. Although a draft bill proposing a ban on private cryptocurrencies was prepared in 2021, it was never introduced in Parliament. Likewise, a long-awaited government discussion paper on digital assets has been postponed multiple times.
A source familiar with the RBI’s position told Reuters:
“The central bank’s inclination is towards prohibition to keep cryptocurrencies outside of the regulated financial system.” — Source familiar with the Reserve Bank of India’s thinking
Neither India’s Finance Ministry nor the RBI responded to Reuters’ requests for comment.
Beyond financial stability, officials are increasingly worried that cryptocurrency transactions are creating significant tax enforcement challenges, adding further momentum to the India crypto ban discussion.
According to the internal documents, India’s tax department found widespread underreporting of cryptocurrency transactions.
Its findings showed that fewer than one-quarter of the 645,000 individuals who conducted cryptocurrency transactions during the financial year ending March 2023 disclosed those activities in their income tax returns.
Officials also warned that overseas exchanges, private wallets, and peer-to-peer transactions conducted in Indian rupees make it significantly more difficult to identify beneficial owners and recover unpaid taxes.
The documents further state that cryptocurrency price volatility and the absence of consistent valuation standards complicate tax assessments.
India currently imposes a 30% tax on cryptocurrency gains, but authorities believe enforcement becomes substantially harder when investors use offshore exchanges or retain their holdings in stablecoins instead of converting them into fiat currency.
Despite these concerns, international exchanges such as Binance and Coinbase continue operating in India after registering with the appropriate government agency.
The Ministry of Corporate Affairs is also examining accounting standards and additional reporting guidance for virtual digital assets.
The RBI’s concerns extend beyond cryptocurrencies to privately issued stablecoins, another factor strengthening calls for an India crypto ban policy.
According to the documents, the central bank warned that foreign currency-backed stablecoins could undermine India’s monetary sovereignty.
It also argued that rupee-backed stablecoins could reduce government revenue generated through issuing sovereign currency while posing additional financial stability risks during periods of market stress.
The RBI further noted that widespread stablecoin usage could make cryptocurrency profits more difficult for tax authorities to detect by reducing the need for investors to convert digital assets into traditional fiat currency.
These concerns mirror broader debates among regulators worldwide over balancing innovation with financial safeguards.
While countries such as Japan and Singapore have opted to regulate cryptocurrencies under comprehensive legal frameworks, China has chosen outright prohibition.
India has yet to determine which path it will ultimately follow, leaving the India crypto ban debate unresolved.
Even as regulators debate stricter controls, cryptocurrency ownership continues to expand across India.
According to estimates cited by the tax department, approximately 39 million Indians held around $2.1 billion worth of digital assets at the end of May.
Globally, cryptocurrencies have also gained renewed momentum following recent policy developments in the United States, including legislation supporting wider use of stablecoins.
For India, however, policymakers continue to face the difficult task of balancing technological innovation with financial stability, consumer protection, tax enforcement, and monetary sovereignty.
Primary Source: Reuters, July 8, 2026.
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