India Keeps Its Distance from Crypto World, Worried About Financial Risks

October 3, 2025

India still isn't jumping into full crypto regulation. They're watching from the sidelines.

A government paper from last month reveals deep concerns. Officials worry that regulating cryptocurrencies might actually legitimize them. This could be dangerous. Digital assets might grow into something that threatens India's financial stability.

The Reserve Bank's Governor Shaktikanta Das has been saying this for years. Trying to regulate crypto? Not so simple. Risky business.

"It may cause the sector to become systemic," warns the document. Yet they know a total ban won't work either. People would still trade peer-to-peer. They'd use decentralized platforms. So the government sits tight. No new laws for now.

Banking Restrictions and a Winding Regulatory Path

India's crypto approach has been kind of all over the place. They drafted a ban bill in 2021. It went nowhere. During their G20 presidency, they pushed for global rules. Seems like a pattern of hesitation.

In 2024, they promised a public paper on crypto. Then they delayed it. Now? They're seemingly waiting to see what America does first.

Foreign crypto exchanges can operate in India. There are conditions though. Register locally. Follow anti-money laundering rules.

Taxes remain brutal for crypto investors. A flat 30% on profits. Plus another 1% TDS on transfers. It's not entirely clear if this is intentional discouragement or just revenue collection.

Traditional banks stay away from crypto businesses. The Reserve Bank's warnings created an invisible wall. Still, Indian investors have somehow put over $4.5 billion into crypto.

Officials think this isn't enough to worry about. Not yet anyway.

Stablecoins Raise Eyebrows as Global Rules Shift

The government paper suggests current policies serve a purpose. Less speculation. Less fraud. They're struggling with policy development while global approaches vary widely.

Trump's GENIUS Act from July 18 has rattled Indian officials. The law expands stablecoin use. This could affect economies worldwide.

Most stablecoins are tied to the US dollar. Indian authorities worry this might disrupt payment systems in other countries. Even "stable" coins can wobble during crises.

They're particularly concerned about their UPI system - India's instant bank transfer network. "Widespread use of stablecoins could fragment national payment systems," the document warns.

The path forward? Not entirely clear. But India seems determined to protect its financial sovereignty while the crypto world evolves around them.