India’s Reserve Bank Doubles Down on Crypto Prohibition

Internal government documents reveal that the central bank remains committed to keeping digital assets entirely outside the regulated financial system. Officials believe that prohibiting banks from holding or trading crypto is essential to prevent financial contagion. The bank specifically warned that stablecoins backed by foreign currencies could undermine the rupee, while domestic tokens might erode fiat-issuing revenues and spark instability during market volatility.

Tax enforcement remains a significant hurdle. Data for the financial year ending in March 2023 shows that fewer than 25% of the 645,000 individuals engaged in crypto trading disclosed their activity in tax returns. Authorities point to the widespread use of overseas exchanges, private wallets, and peer-to-peer transactions as the primary obstacles to identifying owners and collecting the mandated 30% tax on gains. With approximately 39 million Indians holding an estimated $2.1 billion in assets, the government is currently reviewing accounting standards even as a comprehensive legislative framework remains stalled in debate.