India Decides Against Crypto Regulation
India has rejected proposals to establish a clear regulatory framework for cryptocurrencies, choosing instead to maintain a watch-and-wait stance. According to a government document reviewed by Reuters, officials fear that granting crypto legal status would embed it into the mainstream financial system, potentially creating systemic risks.
Officials argue that regulating crypto could fuel explosive growth, while banning it outright would not stop peer-to-peer transfers or decentralized trading. As a result, India has decided against new legislation — for now.
Reserve Bank of India Governor Shaktikanta Das reinforced the position, warning that trying to control crypto through regulations would be “hard and risky”.
A History of Delayed Action
India has a long track record of hesitation on crypto policy. In 2021, the government drafted a bill to ban private tokens but failed to move it forward. During its G20 presidency in 2023, India pushed for a global regulatory framework, only to delay its promised public paper in 2024.
The latest approach appears to be guided by external developments. Officials now say they will wait to see what the U.S. does first before committing to their own framework.
Meanwhile, foreign exchanges can still operate in India if they register locally and undergo due diligence checks. However, punitive taxes on crypto gains and strict compliance requirements have made it almost impossible for domestic banks and crypto firms to maintain working relationships.
Harsh Taxation and Banking Freeze
Despite the absence of formal legislation, India’s policies have effectively created a hostile environment for crypto trading. Taxes on digital assets remain extremely high, while banks have largely frozen links to crypto companies, leaving platforms struggling to access traditional financial rails.
The Reserve Bank of India has been a constant voice of caution, warning consumers about the risks of crypto speculation. Yet, despite regulatory hostility, Indians have poured more than $4.5 billion into crypto holdings, showing sustained retail interest.
The government insists this level of exposure is not yet enough to threaten the wider economy, but its cautious stance continues to frustrate industry participants.
Stablecoins Raise New Fears
The government’s latest document also highlights growing concerns over stablecoins, particularly after U.S. President Donald Trump signed the GENIUS Act on July 18, allowing wider use of dollar-pegged assets.
It points to India’s own Unified Payments Interface (UPI), which handles real-time bank transfers, as potentially vulnerable if stablecoins gain traction.
Officials also note that “stable” coins are not immune to volatility, especially during liquidity shocks, making them risky for integration into national payment systems.
India’s Wait-and-See Approach
For now, India’s strategy is to delay regulation while maintaining high taxes and limited banking access. Officials believe these measures discourage speculative trading while preventing the sector from spiraling out of control.
However, this policy of inaction leaves India trailing behind global peers like the U.S., which are pressing ahead with legal frameworks. Whether India eventually embraces crypto regulation may depend less on domestic demand and more on international policy shifts.
