RBI Pushes India Toward Crypto Ban as 73% of Trading Flees Offshore

Published by James Harris on July 3, 2026July 3, 2026

India’s central bank told a parliamentary committee this week that cryptocurrencies should not be legalized, recommending that banks and regulated financial institutions be barred entirely from holding, trading, or taking exposure to crypto assets and privately issued stablecoins. The RBI’s position, presented by Deputy Governor Rohit Jain and Executive Director P. Vasudevan to the Parliamentary Standing Committee on Finance, is not new, but the formality of submitting it during the committee’s seventh meeting on virtual digital assets signals that prohibition is now the RBI’s explicit policy recommendation, not just its institutional instinct.

The submission lands at a moment when India’s crypto policy is genuinely fractured. The government already taxes crypto at 30% on capital gains with a 1% TDS on transactions and requires exchange registration with the Financial Intelligence Unit, yet no law defines digital assets as a recognized asset class. That gap has consequences: industry data cited by Cryptopolitan in February suggested roughly 73% of Indian crypto trading volume has migrated to offshore platforms, with an estimated 120 million users trading through foreign exchanges. This is a pattern that played out in South Korea and China before regulatory clarity arrived, and in both cases the offshore migration accelerated rather than reversed until rules were settled. The RBI’s containment framing, which would sever links between digital assets and the banking sector entirely, would likely deepen that dynamic rather than resolve it.

The RBI’s own data puts India’s domestic market at 39.3 million KYC-verified users holding assets worth approximately $2.4 billion across 54 registered service providers, a figure that implicitly contradicts the Chainalysis adoption ranking the bank also disputes.

The ICAI, India’s accounting body, told the same committee that blockchain-based systems and stablecoins could accelerate cross-border payments and called for a comprehensive legal framework covering issuance, trading, and custody. That split between the RBI and ICAI matters because parliamentary committees typically synthesize competing submissions, and the gap between “ban it” and “regulate it strategically” is wide enough to produce either a genuinely ambiguous report or a prolonged stalemate. For the privately issued stablecoin question specifically, the RBI’s concern about monetary sovereignty and payment system fragmentation echoes arguments regulators in the EU and US made before MiCA and the current US stablecoin bill framework emerged, both of which chose licensing over prohibition.

The committee chair, MP Bhartruhari Mahtab, has indicated a report is expected soon. What that report recommends will determine whether India’s existing tax infrastructure gets a legal foundation underneath it or remains a revenue mechanism floating above an unrecognized asset class.