India’s central bank is pushing for crypto policy to lean toward prohibition, reviving the country’s hardest policy line against private digital assets as officials review the next phase of virtual digital asset regulation.
The Reserve Bank of India wants banks and regulated financial institutions blocked from holding, trading or gaining exposure to crypto assets and private stablecoins. The central bank’s position is built around financial stability, monetary sovereignty and the risk that privately issued digital assets could weaken control over payment flows and capital movement.
The latest push follows India’s finance committee work on virtual digital assets. The panel held its seventh VDA meeting with RBI and ICAI representatives, keeping legal status, accounting treatment, taxation and investor protection inside the same policy review.
Tax Department Flags Offshore Evasion
The RBI’s stance is not the only pressure point inside the policy file. India’s tax department warned that crypto trading through offshore exchanges has made enforcement harder, with transactions routed outside domestic reporting channels and tax systems.
India already taxes virtual digital assets without granting them legal-tender status. VDA income is taxed at 30%, while a 1% tax deducted at source applies to qualifying transfers. The tax structure has created a reporting trail for domestic activity, but offshore trading and wallet-based transfers remain harder to police.
Reuters-linked figures put Indian crypto participation at nearly 39 million traders holding around $2.1 billion in digital assets. Fewer than 25% of 645,000 traders in fiscal 2023 reported those holdings in tax filings, sharpening the enforcement argument around offshore platforms and unreported gains.
Stablecoins Stay In The Crosshairs
Private stablecoins sit near the center of the RBI’s concern because they can move dollar-linked value across borders outside conventional banking rails. The central bank has repeatedly warned that stablecoins can create monetary-policy and capital-flow risks, especially in a market with strict foreign-exchange controls.
India’s enforcement agencies have already targeted crypto-linked transfer routes. The Enforcement Directorate searched Bengaluru firms over an alleged $265 million crypto-linked transfer probe, with the case focused on alleged foreign-exchange violations tied to on-ramp and off-ramp services.
The policy track remains separate from an outright law. India prepared a bill to ban private cryptocurrencies in 2021, but it was never introduced. The current review keeps prohibition, banking containment, tax enforcement and accounting standards under discussion while the Ministry of Corporate Affairs examines how digital assets should be treated in company accounts.
