RBI Leans Toward Crypto Ban Despite India Boasting 39 Million Traders & $2.1B Holdings
The Reserve Bank of India (RBI) is intensifying its push for a cryptocurrency ban, internal government documents revealed on July 8, 2026. The central bank is advocating for a policy that “leans toward prohibition,” despite India having nearly 39 million digital asset investors holding approximately $2.1 billion in cryptocurrencies.
RBI Deputy Governor Rohit Jain presented the central bank’s containment case before the Parliamentary Standing Committee on Finance on July 2. He urged lawmakers to keep digital tokens out of payments and ensure banks remain insulated from crypto exposure. A parliamentary report expected during India’s monsoon session could shape the next regulatory chapter.
The RBI’s stance targets both foreign-backed and rupee-pegged stablecoins. The documents reviewed by Reuters suggest dollar-backed stablecoins could threaten India’s monetary sovereignty. Rupee-pegged tokens, the RBI cautioned, could lead to a loss of seigniorage—the revenue the government generates from issuing fiat currency—and strain finances during market turbulence.
This is not the RBI’s first attempt to restrict crypto. In 2018, the central bank barred banks from servicing crypto firms, but India’s Supreme Court struck down that ban in 2020, leaving the country without a dedicated cryptocurrency law. Since then, India has navigated the legal vacuum solely through tax policy. A 2021 draft bill to ban private cryptocurrencies was never tabled in Parliament, and a government discussion paper has languished. Last September, the finance ministry decided that existing tax legislation was effective in curbing crypto risks, but the RBI is now making renewed efforts.
India’s crypto market remains substantial. The country topped the Chainalysis 2025 Global Crypto Adoption Index across all four sub-indices: retail, CeFi, DeFi, and institutional activity. However, the Income Tax Department admits that less than 25% of the 645,000 people engaged in crypto activity during FY2023 properly reported gains. Indian crypto users already face a flat 30% tax plus a 1% tax deducted at source on every trade, with no provision to offset losses, pushing many to offshore platforms.
The pattern of failed bans is well established. Each previous scare—including the 2021 draft that proposed a 3–6 month investor liquidation window—did not pass Parliament. The RBI has consistently advocated prohibition, while the government has chosen taxation and supervision. Crypto trading remains legal in India until a new law passes Parliament and survives a court challenge. The ongoing discussion could intensify during the monsoon session, but history suggests adoption will move faster than regulation.