RBI Tries Again: India Central Bank Knocks on Crypto's Door, Gets the 2018 Answer 💸

The Reserve Bank of India is pressing the government to wall off banks and financial institutions from cryptocurrencies and privately issued stablecoins, arguing that any exposure would create contagion risks in the formal lending system, according to internal documents reviewed by Reuters. The central bank's preferred approach, described in the documents as policies "leaning towards prohibition," would keep digital assets outside the regulated financial perimeter — a position that revives a fight the RBI lost in 2018, when the Supreme Court struck down an earlier circular that had effectively cut banks off from crypto dealings. Deputy Governor Rohit Jain outlined the containment case before the Parliamentary Standing Committee on Finance on July 2, and a formal report is expected during the monsoon session of Parliament.

Stablecoins have moved to the center of the RBI's warning. The central bank said foreign-currency-pegged tokens threaten India's monetary sovereignty, while rupee-backed tokens could erode seigniorage — the revenue the government earns from issuing fiat currency — and strain finances during periods of market stress. Permitting stablecoins would also make it harder to identify and tax crypto profits, the RBI argued, because users would have less need to convert holdings into rupees. India currently taxes crypto gains at 30% and levies a 1% tax on each transaction, but the tax department flagged offshore exchanges, private wallets and peer-to-peer rupee trades as obstacles to tracing beneficial owners. Officials cited instances of misreporting in crypto disclosures, noting that fewer than a quarter of the 645,000 people who traded crypto in the fiscal year ending March 2023 reported the activity on their tax returns.

Indian banks remain technically permitted to serve crypto clients, though most major lenders have stepped back from the sector after repeated cautionary statements from the central bank. Government figures put the number of Indian crypto traders at nearly 39 million, holding roughly $2.1 billion in digital assets at the end of May, according to tax department estimates — a user base that places India at the top of the Chainalysis 2025 global crypto adoption index. The Ministry of Corporate Affairs is reviewing accounting standards and guidance for virtual digital assets, even as a 2021 draft bill to ban private cryptocurrencies was never introduced and a broader discussion paper remains delayed.

The RBI's renewed push arrives as global policy direction has tilted the other way. The United States has reaffirmed its commitment to the industry and put forth the CLARITY Act for Senate consideration, while Japan and Singapore have built out formal regulatory frameworks; China continues to maintain its ban. Whether New Delhi converts the central bank's prohibition-leaning stance into binding law, or leaves crypto in its years-long grey zone, will shape the outlook for Indian exchanges, Web3 startups, institutions and investors in the coming months.