India is resisting calls to regulate cryptocurrencies, warning that granting them legal recognition could pose systemic risks to its financial system despite global moves towards adoption.
India’s cautious stance on digital assets
India has signalled it will not move forward with legislation to regulate cryptocurrencies, instead opting for limited oversight. According to a government document reviewed by Reuters, officials fear that formally recognising digital assets could create systemic risks for the country’s financial system.
The document reflects the Reserve Bank of India’s (RBI) position that regulating cryptocurrencies in practice would be “difficult” and could unintentionally lend legitimacy to an industry it views as speculative and volatile.
Global regulatory contrasts
India’s caution stands in contrast to international developments. The United States, under President Donald Trump, has overseen a surge in cryptocurrency adoption, with bitcoin reaching record highs. Washington has also passed laws supporting the use of stablecoins — digital tokens backed by fiat currencies — aimed at reducing market volatility.
China continues to enforce a ban on cryptocurrencies, though it is reportedly weighing a state-backed Yuan stablecoin. Meanwhile, Japan and Australia have been developing regulatory frameworks, though both countries remain careful not to actively encourage widespread crypto use.
The Indian government’s position, outlined this month, underscores the view that regulation could legitimise crypto assets and “may cause the sector to become systemic.”
Balancing risks and limitations
The report highlights that while a complete ban could address what it describes as the “alarming” risks associated with speculative trading, it would still leave challenges unresolved. Peer-to-peer transfers and decentralised exchanges, which operate beyond direct government oversight, would remain difficult to control.
India’s finance ministry and the RBI did not immediately respond to requests for comment on the document.
Past attempts and policy delays
This is not the first time India has wrestled with crypto regulation. In 2021, the government drafted a bill to ban private cryptocurrencies, but the legislation never moved forward.
During its presidency of the G20 in 2023, India called for a coordinated global approach to regulating digital assets. The following year, it signalled plans to release a discussion paper on its stance but deferred the process, saying it would wait until the U.S. finalised its framework.
Currently, global crypto exchanges may operate in India if they register locally with a government agency tasked with conducting due diligence to prevent money laundering. However, steep taxes on crypto gains have further stifled activity.
RBI’s continued scepticism
The RBI has been consistent in warning against the risks of cryptocurrencies. Its concerns have already led to a near-complete freeze on trading links between the formal banking system and the crypto sector.
While millions of Indians continue to show interest in digital assets, the government remains reluctant to grant the industry legitimacy. For now, India’s strategy appears to be a wait-and-watch approach — keeping crypto on the margins of the financial system while global frameworks evolve.
