RBI Pushes Tough Crypto Restrictions to Protect India’s Banks: Report

RBI supports tougher crypto restrictions as India reviews digital asset rules, banking exposure, stablecoins, and future crypto regulations.

The Reserve Bank of India (RBI) has again taken a tough stand on cryptocurrency. The central bank shared its views with a Parliamentary committee on Thursday. It backed more crypto and private stablecoin regulation. Furthermore, it stated that digital assets may pose financial risks and facilitate cross-border illegal activities.

Why Does RBI Want Stronger Crypto Rules?

According to The Economic Times, RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan appeared before the Parliamentary Standing Committee on Finance. They clarified the stance of the RBI on cryptocurrencies and digital assets.

RBI has backed a containment approach to cryptocurrencies. It wishes banks and financial institutions to avoid digital assets. It also advised lawmakers to stop the use of crypto for payments and settlements.

Related Reading: India FIU Demands Crypto OTC Records Above $10K 

Moreover, the RBI has mentioned that a complete ban is still a policy option. It feels that cryptocurrencies are still hard to regulate. Hence, the central bank is seeking more stringent regulations prior to the further expansion of the market.

People familiar with the meeting said the RBI also raised concerns about financial crimes. It cautioned that cryptocurrencies could be used for money laundering, drug trafficking, and financing terrorism. These crimes are frequently transnational.

The RBI feels that cryptocurrencies may pose greater challenges to emerging economies such as India, a lawmaker said. China was also mentioned, as it has already prohibited cryptocurrency activities.

But some members of the committee doubted the RBI’s strategy. They wondered why India is keeping crypto out of the regulatory framework, while other nations such as Indonesia, Hong Kong, and the UAE have adopted it. They also pointed out that India ranks first in the Global Crypto Adoption Index for 2025, ahead of the United States and Pakistan.

How Could These Crypto Rules Affect India?

India already has tight cryptocurrency tax regulations. Digital assets are considered Virtual Digital Assets (VDAs). The tax rate on profits for investors is 30% with a cess of 4%.

Besides, crypto exchanges also charge a 1% Tax Deducted at Source (TDS) on transactions. Investors also are not allowed to offset losses from one crypto asset with gains from another. They are also unable to pass those losses on to future tax years.

Meanwhile, India’s stablecoin market has recently seen unusual price movements. The price of USDT traded at a premium of more than 8.5%. This came following regulatory measures to curtail the supply of stablecoins in the nation. Meanwhile, demand remained robust and legal uncertainty grew.

The government has also stepped up its regulation of cryptocurrency transactions. The Financial Intelligence Unit (FIU) recently requested documents from major crypto exchanges regarding OTC trades exceeding $10,000. Exchanges also need to determine who the true owners are behind these exchanges. Further, they are required to maintain these records after January 2026.

The RBI’s new proposal is akin to the one it had in 2018. At that time, the central bank stopped regulated banks from providing services to cryptocurrency businesses. This led to some crypto exchanges being cut off from banking services.

However, the Supreme Court cancelled those restrictions in March 2020. The court has held that the RBI’s decision was in violation of the principle of proportionality.

Now, lawmakers are preparing a report on India’s digital asset policy. The recommendations may influence future regulations for cryptocurrencies, stablecoins, crypto payments, and banks. Therefore, the RBI’s latest views may strongly influence whether India adopts stricter restrictions or creates a regulated framework for the growing crypto market.

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