Reserve Bank of India Advocates for Cryptocurrency Prohibition

The Reserve Bank of India has reasserted its position that national cryptocurrency policy should be "leaning towards prohibition" to safeguard financial stability and monetary sovereignty. Internal government documents show the central bank recommends barring banks and financial institutions from trading or holding crypto assets and privately issued stablecoins to prevent contagion risks.

This push for tighter curbs coincides with warnings from the Income Tax Department regarding systemic tax evasion. Officials reported that fewer than 25% of the 645,000 individuals who engaged in cryptocurrency transactions during the financial year ending March 2023 reported them on tax returns. The department noted that offshore exchanges and peer-to-peer trades make recovering the 30% cryptocurrency gain tax particularly difficult.

While the government has delayed a formal policy since a 2018 court ruling overturned previous bans, the Ministry of Corporate Affairs is currently reviewing accounting and reporting guidelines for virtual digital assets. Indian authorities also expressed concern that digital assets could accelerate capital outflows and worsen the national external deficit. This restrictive stance aligns more closely with China's prohibition than with the regulatory frameworks established in Japan and Singapore.