Reserve Bank of India Maintains Call to Bar Banks From Crypto After Earlier Ban Was Overturned

The Reserve Bank of India continues to push for a policy leaning toward prohibition of crypto, according to government documents reviewed by Reuters and reported by CoinDesk. The central bank maintains that banks and financial institutions should be barred from holding, trading, or offering any exposure to crypto assets and privately issued stablecoins.

India has nearly 39 million crypto investors out of a population of almost 1.5 billion.

These investors held roughly $2.1 billion in digital assets as of May. The RBI is also averse to rupee-pegged stablecoins, warning they could erode seigniorage and create stress points during market turbulence. Tax authorities noted that in the financial year ended March 2023, fewer than a quarter of the 645,000 individuals who transacted in crypto declared those gains on their tax returns.

Transactions on offshore exchanges and peer-to-peer platforms, especially those denominated in rupees, remain difficult to track, trace and tax. Indian crypto investors have operated in a regulatory grey zone since the Supreme Court struck down the RBI’s 2018 ban. A 2021 draft bill to ban private cryptocurrencies was never presented.

India is heavily dependent on energy imports and has persistent current account deficits. Tensions with Iran drove oil prices higher, inflating the energy import bill and pushing the rupee to record lows. Authorities are concerned that widespread crypto adoption could accelerate capital outflows and worsen the external deficit.