RBI tells Indian parliament crypto should not get legal status, keeps prohibition on the table

The Reserve Bank of India (RBI) has informed a parliamentary committee that cryptocurrencies pose a threat to India’s economy, and it is also recommending that they should not be legalized.

The bank has had a long-standing opposition to digital assets, and this latest submission reinforces its position as lawmakers weigh the country’s digital asset policy.

RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented the central bank’s position to the Parliamentary Standing Committee on Finance, chaired by BJP MP Bhartruhari Mahtab, according to The Economic Times. The session was the seventh meeting the panel has held on virtual digital assets.

In a background note submitted to the committee, the RBI stated that conventional financial regulation applied to crypto assets would amount to legitimizing speculative products that are not beneficial to the economy.

The bank warned that creating a regulation around crypto creates a false perception of safety among users and also exposes the banking sector to assets that are unstable.

RBI recommended that banks and regulated financial institutions be barred from holding, trading, or taking on exposure to crypto assets and privately issued stablecoins.

The RBI sees prohibition as a recognized policy option

The RBI outlined what it called a containment strategy tilted toward prohibition, one that would block crypto from payments and settlements and also sever the links between digital assets and the banking sector.

The central bank also flagged stablecoins as a distinct risk, as it states that the adoption of privately issued stablecoins could weaken monetary policy transmission, fragment payment systems, and threaten India’s monetary sovereignty, adding that it lacks the foundational properties of money.

What does the RBI position mean for India’s crypto adoption ranking?

The central bank pushed back on the commonly cited claim that India leads the world in crypto adoption, a ranking derived from Chainalysis’s annual index. RBI says that the methodology is flawed and overstates adoption in countries with large populations.

RBI data submitted to the panel put the scale of India’s crypto market at 54 FIU-registered service providers and 39.3 million KYC-verified users holding assets worth about 20,437 crore rupees, which is approximately $2.4 billion.

The central bank also linked a significant share of crypto activity to fraud, scams, and the movement of illicit funds, telling the committee that tracking offshore entities involved in crypto trading presents a serious regulatory challenge.

What is India’s accounting body’s opinion on a digital asset policy?

RBI’s position is not a general consensus in the country, as the Institute of Chartered Accountants of India (ICAI) told the same committee that virtual digital assets (VDA) present strategic opportunities if paired with India’s strengths in digital infrastructure and fintech.

ICAI believes that blockchain-based systems and stablecoins could make cross-border payments faster and cheaper, complementing existing infrastructure.

The accounting body has called for a comprehensive VDA law that covers issuance, trading, and custody. 

What is the current state of India’s digital asset policy split?

The Indian government levies a 30% capital gains tax and a 1% TDS on crypto transactions while requiring exchanges to register with the Financial Intelligence Unit. However, no law defines digital assets as a recognized asset class, and the RBI continues to push for their exclusion from the financial system.

Industry data cited by Cryptopolitan in February showed that around 73% of Indian crypto trading volume had migrated to offshore platforms, with an estimated 120 million Indian users trading through foreign exchanges.

MP Raghav Chadha warned at the time that strict taxation without a regulatory framework was driving capital and startups out of the country.

The parliamentary committee is expected to produce a report on virtual digital assets soon, according to its chair, MP Bhartruhari Mahtab.

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