India’s RBI warned Parliament that crypto assets are speculative in nature and pose a threat to the banking system, while the country’s market reported 39.3 million KYC users.
The Reserve Bank of India (RBI) has just presented to Parliament’s Standing Committee on Finance its position opposing granting legal status to crypto assets, during the committee’s seventh session on crypto assets.
Deputy Governor of the RBI Rohit Jain and CEO P. Vasudevan affirmed that applying traditional financial regulatory frameworks to crypto assets effectively legitimizes speculative products, providing no benefits to the economy.
The central bank warns that such a regulatory framework would create an illusion of safety for users, while exposing the banking sector to risks from unstable assets.
The RBI has proposed a complete ban on banks and regulated financial institutions holding, dealing in, or having exposure to crypto assets as well as stablecoins issued by the private sector. The regulator has outlined a containment strategy leaning toward prohibition, aiming to remove crypto assets from payment and settlement activities and to sever links with the banking system.
On stablecoins, the RBI believes that accepting privately issued coins could weaken the primary transmission mechanism of monetary policy, fragment the payments system, and threaten the national currency sovereignty, due to the absence of fundamental attributes of a true currency.
The central bank also rejected the widely held claim that India leads the world in crypto-asset adoption, with its ranking based on a Chainalysis index, saying the methodology is flawed and inflates figures in populous countries.
According to data submitted to the RBI committee, India’s crypto-assets market currently has 54 registered service providers with the Financial Intelligence Unit, and 39.3 million users have verified KYC, holding assets worth about INR 20,437 crore, equivalent to $2.4 billion.
The bank also links much of crypto-asset activity to fraud, scams, and illegal fund flows, and emphasizes the difficulty of monitoring foreign entities involved in transactions.
A split in views on national crypto-asset policy
The RBI’s hardline stance is not the consensus view in India. The Institute of Chartered Accountants of India (ICAI) says crypto assets offer strategic opportunities if combined with the country’s digital infrastructure and fintech strengths, and it calls for the enactment of a comprehensive law covering the issuance, trading, and custody of crypto assets.
Meanwhile, the Government of India continues to levy a 30% capital gains tax and a 1% tax deducted at source on crypto-asset transactions, without recognizing them as a legally valid asset—a policy paradox said to have pushed about 73% of domestic transaction volume, corresponding to an estimated 120 million users, to overseas exchanges. A parliamentary committee is expected to soon publish an official report on the issue.