India is leaning against introducing a comprehensive cryptocurrency regulatory framework and will instead maintain partial oversight of the sector, according to a government document reviewed by Reuters. Officials fear that integrating digital assets into the country's mainstream financial system could heighten systemic risks.
The document, prepared in September 2025, reveals the Reserve Bank of India's (RBI) longstanding skepticism toward cryptocurrencies. 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 demonstrated 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. India continues to rank at the top of the global crypto adoption index, ahead of the United States.
The government also raised concerns about stablecoins, noting that while designed for price stability, they remain vulnerable to market shocks. Their widespread use 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.
This cautious stance reflects years of shifting signals. In 2021, the government drafted a bill to ban private cryptocurrencies but never tabled it in parliament. During its G20 presidency in 2023, India pressed for a global regulatory framework. The following year, it postponed a discussion paper on domestic policy, saying it would wait for clarity from the United States.
Meanwhile, India's Supreme Court has urged the government to establish clear regulations, arguing that the existing tax regime amounts to implicit recognition of the sector. Industry leaders like CoinDCX CEO Sumit Gupta have called for a parliamentary committee and dedicated Web3 working group to chart a long-term roadmap.
India has committed to implementing the OECD's Crypto-Asset Reporting Framework (CARF) by April 2027, which will require automatic reporting of crypto transactions worldwide as part of a push to strengthen compliance and improve transparency.