India Stalls Full Crypto Framework, Citing Systemic Risk Fears: Report

Wed, Sep 10, 2025, 10:35 AM 3 min read

India is leaning against introducing a comprehensive crypto law and will instead maintain partial oversight of the sector, a government document shows. Officials fear that integrating digital assets into the country’s mainstream financial system could heighten systemic risks.

The document, prepared this month and reported by Reuters, shows the Reserve Bank of India’s (RBI) longstanding skepticism. The central bank argued that effective regulation would be difficult in practice and that granting cryptocurrencies legitimacy could fuel wider adoption, making the sector systemic.

While an outright ban could curb the “alarming” risks from speculative assets, the government acknowledged it would not prevent peer-to-peer transfers or activity on decentralized exchanges.

India has relied on heavy taxation and compliance requirements to contain crypto activity. A 30% tax on profits and a 1% tax deducted at source on transactions have sharply reduced domestic trading volumes.

However, global exchanges are permitted to operate if registered with the Financial Intelligence Unit, as seen when Bybit resumed services after paying a 9.27 crore rupee ($1.06 million) penalty for earlier violations.

Despite these restrictions, crypto adoption remains robust. The government estimated that Indians hold roughly $4.5 billion in digital assets, with limited adoption and strict rules helping to contain risks to the wider financial system.

Officials said the current framework discourages speculative trading and penalizes fraud, even as India continues to rank at the top of the global crypto adoption index, ahead of the United States.

The government also raised concerns about the role of stablecoins, noting that while they are designed for price stability, they remain vulnerable to market shocks.

Their widespread use, the document said, could fragment domestic payment systems and undermine India’s widely adopted Unified Payments Interface (UPI). With most stablecoins pegged to the U.S. dollar, their growth could also pose challenges to global financial stability.

For now, India is maintaining its cautious approach: tightening oversight without granting digital assets the legal recognition that could make them systemic.

While the Reserve Bank of India has maintained deep skepticism toward digital assets, demand has persisted among Indian investors despite some of the world’s toughest tax rules. Other arms of government have also pushed for clarity.

India’s Supreme Court recently urged the government to establish clear regulations, arguing that the 30% tax on crypto gains and the 1% TDS levy amount to implicit recognition of the sector.