India’s Crypto Crackdown Deepens as Central Bank Urges Ban on Bank Exposure

India’s central bank urges crypto prohibition and bank exposure limits as tax officials flag offshore trading risks.

India’s central bank has again called for a crypto policy that leans toward prohibition. Reuters reported the position after reviewing recent government documents.

The Reserve Bank of India recommended barring banks from holding, trading, or gaining exposure to crypto assets. It also included privately issued stablecoins in the warning.

India’s tax department raised concerns about offshore exchanges, private wallets, and peer-to-peer trades. It said these channels can make owners and taxable income harder to trace.

The documents arrived while India still lacks a final national crypto policy. Tax department estimates show nearly 39 million users held about $2.1 billion in digital assets.

RBI Seeks Stronger Limits on Crypto Exposure

The RBI said crypto policy may need to lean toward prohibition to control financial risks. It wants crypto kept outside the regulated banking system. The bank has raised similar concerns in past public warnings.

The central bank recommended clear restrictions for lenders and financial institutions. These firms would be barred from holding or trading crypto assets. They would also avoid direct exposure through related products.

Indian banks are not fully banned from working with crypto firms today. However, many large lenders have stayed away after repeated RBI warnings. As a result, much local crypto activity remains outside banking channels.

Tax Officials Warn About Tracking Problems

According to Reuters, India’s tax department said offshore crypto exchanges create compliance problems for authorities. It said private wallets can hide the real owners of digital assets. This can make tax recovery more difficult when funds move abroad.

The department also flagged rupee-based peer-to-peer crypto trades. These transactions can reduce visibility over taxable income. India currently taxes crypto gains at 30%.

Officials also warned that stablecoins may make tracking harder. Users can trade between crypto assets without returning to regular money. Therefore, authorities may lose clear records of gains and ownership.

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India Still Delays Final Crypto Rules

India has kept crypto in a grey zone for several years. A 2021 draft bill to ban private cryptocurrencies was never introduced. A wider policy paper has also faced repeated delays.

The finance ministry earlier supported limited rules after talks with the RBI. That view said current tax and legal measures had reduced some risks. However, the latest documents show stronger pressure for tighter curbs.

The government has said any policy must balance innovation, risk control, and consumer protection. It also wants to protect monetary sovereignty and financial stability. For now, crypto trading continues without a clear national framework.

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