India’s Central Bank Backs Crypto Ban Push as Tax Concerns Grow 

Highlights:

• India’s Central Bank wants crypto kept away from banks and private stablecoin exposure.
• Tax officials say offshore exchanges and private wallets weaken reporting.
• India still has nearly 39 million crypto investors despite unclear rules.

India’s central bank has pushed India’s crypto debate toward stricter limits, according to Reuters. The Reserve Bank of India told officials that crypto assets and private stablecoins should stay outside regulated finance. Meanwhile, tax officials warned that offshore trading weakens enforcement.

India’s Central Bank Keeps Crypto Outside Finance

The RBI told the government that banks and financial institutions should avoid crypto holdings, trading, and related exposure. It argued that such links could move risk from volatile token markets into the wider financial system. Therefore, the central bank still prefers a policy leaning toward prohibition.

The view also covers privately issued stablecoins. According to the documents, the RBI sees foreign currency-backed tokens as a threat to monetary sovereignty. It also says rupee-backed stablecoins could cut seigniorage income and strain stability during market stress.

The central bank added another tax concern. Wider stablecoin use could reduce conversions into fiat currency. As a result, authorities may find it harder to identify gains and collect taxes from digital asset users.

🇮🇳BREAKING: INDIA’S CENTRAL BANK IS BACKING A CRYPTO BAN

The RBI wants India’s crypto policy to "lean toward prohibition", warning of risks to financial stability and monetary sovereignty.

Reuters says it also wants banks blocked from holding, trading or gaining exposure to… pic.twitter.com/RuIv6uiXvc

— Coin Bureau (@coinbureau) July 8, 2026

Tax Officials Point to Offshore Trading Gaps

India’s Income Tax Department raised separate concerns about weak reporting. The department found that fewer than one-quarter of 645,000 crypto users traded that year. Most did not report those transactions on tax returns.

Overseas exchanges make it difficult to verify ownership, officials said. Private wallets also complicate recovery efforts because they often sit outside local reporting systems. Furthermore, peer-to-peer transactions involving rupees can hide taxable income as regular bank transfers and payment apps. India already taxes crypto gains at 30%. It also applies a 1% tax deducted at source on many transactions. However, tax officials said some traders use foreign platforms and wallet transfers to reduce visibility.

Regulators have started seeking more records from exchanges. Last month, India’s Financial Intelligence Unit asked major platforms to preserve data on large crypto transactions. The order covers over-the-counter activity from January 2026 onward. The request focused on ownership, fund sources, and destination wallets.

India FIU Seeks Crypto OTC Trade Records Above $10,000 From Major Exchanges

India’s Financial Intelligence Unit, the country’s anti-money laundering watchdog, has asked three major crypto exchanges to submit information on OTC transactions above USD 10,000, with a focus on… pic.twitter.com/GCU8aWjJDz

— Wu Blockchain (@WuBlockchain) June 23, 2026

Policy Uncertainty Continues Despite Large User Base

Crypto trading remains legal in India. The government recognizes digital assets as virtual digital assets rather than as legal tender. As a result, exchanges can operate after registering with financial intelligence regulators and complying with anti-money laundering regulations.

The government has been utilizing tax provisions, anti-money laundering controls, and the registration of exchanges. However, internal documents indicate that such agencies remain concerned about financial stability. They also worry that unregulated token markets may weaken the regulation of capital flows.

However, India still lacks a dedicated crypto law. The Banking Restrictions imposed by the RBI in 2018 were overturned by the Supreme Court in 2020. Later, a draft bill that proposed a private cryptocurrency ban was presented in 2021 but has never been presented to Parliament.

Meanwhile, the Ministry of Corporate Affairs continues to study accounting guidance for virtual digital assets. However, officials still have not said when Cabinet may settle the issue. Reuters cited tax department estimates that nearly 39 million Indians held about $2.1 billion in digital assets as of the end of May.