India’s central bank is again signaling that it wants crypto kept largely out of the country’s financial system. In new government documents, the Reserve Bank of India (RBI) said policy may need to “lean toward prohibition,” especially inside formal finance.
According to Reuters, the RBI urged the government to bar banks and regulated financial institutions from holding, trading, or gaining exposure to crypto assets and privately issued stablecoins. The central bank warned that links between regulated entities and crypto could create “risk spillover” into the wider financial system. It also repeated its long-standing view that crypto assets are not money and can fuel speculation, fraud, and macro‑level instability.
In an earlier reply to Parliament, the Finance Ministry confirmed that “RBI has recommended that crypto assets should be prohibited” and stressed that any ban or strict regulation will likely require global coordination because these assets are borderless.
A government inter‑ministerial committee previously went further, recommending that “all private cryptocurrencies be prohibited in India,” while still recognizing the need for technical innovation. Despite those views, India has so far chosen to tax and monitor crypto rather than impose a full ban.
India Flags Growing Crypto Tax Evasion Through Foreign Platforms
At the same time, India’s Income Tax Department is warning lawmakers that tracking crypto income under current rules is difficult. Officials told a parliamentary finance committee that trades through offshore exchanges and private wallets can make it “virtually impossible” to identify real owners and recover taxes. They also said rupee‑denominated peer‑to‑peer deals, often settled via local bank transfers or apps, make taxable income much harder to trace.
India already taxes gains on “virtual digital assets” at 30%. It also applies a 1% tax deducted at source (TDS) on many transactions. Yet tax authorities say some traders try to dodge these rules by using foreign platforms. They also note complex, multi‑step transfers across chains and wallets can hide activity.
Regulators are responding by pulling more data from exchanges and increasing automated scrutiny. They are also warning that hidden offshore holdings can bring penalties under India’s Black Money Act.
Even with these concerns, crypto trading remains allowed in India, but it sits in a narrow, heavily taxed space. The government treats crypto as a “virtual digital asset” rather than legal tender and has brought these assets under anti‑money‑laundering rules. The RBI’s call to “lean toward prohibition” suggests the central bank wants stricter separation between crypto and the formal banking system, not necessarily an immediate full ban.
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