Fresh government documents reveal stricter oversight may be on the horizon for India’s cryptocurrency ecosystem
RBI Continues To Push For Tougher Crypto Restrictions
India’s cryptocurrency policy could soon witness a significant shift, with fresh government documents indicating that the Reserve Bank of India (RBI) continues to favour a policy that leans towards banning private cryptocurrencies. At the same time, the Income Tax Department has warned that digital assets are increasingly being used to evade taxes, particularly through overseas exchanges and private wallets.
According to documents reviewed by Reuters, the RBI believes cryptocurrencies pose serious risks to India’s financial stability and monetary sovereignty. The central bank has recommended that banks and other regulated financial institutions should be prevented from holding, trading, or gaining exposure to cryptocurrencies and privately issued stablecoins. The RBI argues that allowing such assets into the formal financial system could increase systemic risks while making financial regulation more difficult.
Tax Department Flags Widespread Evasion Risks
The Income Tax Department has also expressed growing concerns over the difficulty of tracking cryptocurrency transactions. Officials found that fewer than one-fourth of the 645,000 individuals who traded cryptocurrencies during the financial year ending March 2023 reported those holdings in their income tax returns. Transactions conducted through overseas exchanges, private wallets and peer-to-peer platforms make it harder to identify beneficial owners and recover taxes.
Authorities believe that the increasing use of offshore crypto platforms is making enforcement more difficult despite the government’s existing tax framework.
India Still Lacks A Comprehensive Crypto Law
India currently taxes cryptocurrency gains at 30% and imposes a 1% Tax Deducted at Source (TDS) on transactions. However, despite these tax rules, the country still lacks a comprehensive legal framework governing cryptocurrencies. A draft bill proposing a ban on private cryptocurrencies was discussed in 2021 but never reached Parliament, while a long-awaited policy paper has been delayed several times.
The latest documents also reveal that the Ministry of Corporate Affairs is reviewing accounting standards and reporting guidelines for virtual digital assets. This suggests regulators are preparing stronger compliance measures even as the government continues evaluating its long-term crypto strategy.
What This Means For India’s Crypto Industry
India’s cautious approach differs from countries such as Japan and Singapore, which have chosen to regulate cryptocurrencies instead of prohibiting them. Nevertheless, Indian authorities remain concerned that widespread adoption of private digital assets could undermine monetary policy, increase financial risks, and facilitate tax evasion.
For crypto investors, exchanges and fintech companies operating in India, the coming months could be crucial. Whether the government ultimately introduces tighter regulations or moves closer to a partial ban, the policy decisions ahead are likely to shape the future of India’s digital asset market for years to come.
Summary
India may tighten cryptocurrency regulations as the RBI reiterates support for a policy favouring a ban on private digital assets while tax authorities warn of rising tax evasion through offshore exchanges and private wallets. Although no final decision has been announced, regulators are considering stricter oversight that could significantly reshape India’s crypto ecosystem.
