01 Read
What happened
The RBI told Parliament's Standing Committee on Finance on July 2, 2025 that cryptocurrencies threaten monetary sovereignty and should not be legalised. The central bank advocated a containment strategy to insulate banks from virtual digital assets (VDAs). India currently has 54 FIU-registered crypto providers, approximately 39.3 million verified users, and crypto holdings worth Rs 20,437 crore. The government taxes VDA gains at 30% with 1% TDS, yet no comprehensive regulatory law exists.
02 Understand
Why it matters
India's crypto policy is caught in a fundamental contradiction: the state taxes and counts a market it refuses to legitimise. The RBI's containment pitch rests on three pillars — financial stability, monetary sovereignty, and anti-money laundering — but each runs into a hard structural limit.
On financial stability, ring-fencing domestic banks is logical given crypto's volatility, but most activity has already migrated offshore. The RBI concedes it cannot easily supervise crypto held by offshore entities, meaning containment disciplines only the compliant onshore minority.
On monetary sovereignty, the RBI's critique of stablecoins is well-founded — dollar-pegged tokens can hollow out rupee demand — but its proposed substitute, the digital rupee (CBDC), has seen tepid adoption since its December 2022 launch, unable to displace the deeply entrenched UPI ecosystem.
On anti-money laundering, the government's own admission that it lacks a real-time crypto transaction tracking system undermines the case that prohibition-lite is working.
The deeper fault line is jurisdictional. SEBI has signalled willingness to regulate VDAs as securities, creating a potential multi-regulator framework. The RBI's blanket containment leaves no room for this. The Supreme Court struck down the RBI's earlier 2018 circular banning banks from crypto dealings in 2020, signalling that outright exclusion without legislation is legally fragile. Parliament's Standing Committee report, expected soon, will decide whether India regulates crypto by isolation or by dividing oversight.
On financial stability, ring-fencing domestic banks is logical given crypto's volatility, but most activity has already migrated offshore. The RBI concedes it cannot easily supervise crypto held by offshore entities, meaning containment disciplines only the compliant onshore minority.
On monetary sovereignty, the RBI's critique of stablecoins is well-founded — dollar-pegged tokens can hollow out rupee demand — but its proposed substitute, the digital rupee (CBDC), has seen tepid adoption since its December 2022 launch, unable to displace the deeply entrenched UPI ecosystem.
On anti-money laundering, the government's own admission that it lacks a real-time crypto transaction tracking system undermines the case that prohibition-lite is working.
The deeper fault line is jurisdictional. SEBI has signalled willingness to regulate VDAs as securities, creating a potential multi-regulator framework. The RBI's blanket containment leaves no room for this. The Supreme Court struck down the RBI's earlier 2018 circular banning banks from crypto dealings in 2020, signalling that outright exclusion without legislation is legally fragile. Parliament's Standing Committee report, expected soon, will decide whether India regulates crypto by isolation or by dividing oversight.
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