The regulatory climate in India is once again demonstrating its ambiguity. The Reserve Bank of India (RBI) has put forward a new, extremely stringent proposal: to ban all banks, financial organizations, and other financial institutions from conducting transactions with crypto assets and private stablecoins. This step, based on the regulator's internal documents, indicates a systemic distrust of digital currencies by the country's monetary authorities.
Special emphasis in the document is placed on private stablecoins, which the RBI views as a direct threat to financial stability and monetary policy. Unlike state-issued digital currencies (CBDCs), whose issuance is controlled, private counterparts, according to the regulator, carry risks of money laundering and uncontrolled capital outflows. This is not the first attempt by the RBI to impose a total ban: previously, the Supreme Court of India overturned a similar circular from 2018, but the regulator has not given up trying to regain control.
Concurrently, the country's tax authority has published a warning about large-scale risks of tax evasion. According to fiscal estimates, India has nearly 39 million crypto traders, whose total assets are valued at $2.1 billion. However, the real picture is even more alarming: in the financial year ending in March 2023, 645,000 individuals conducted digital asset transactions, but less than a quarter of them reported these operations in their tax returns. This creates a massive gap between the actual market volume and fiscal reporting.
Analytical Commentary: In my view, the current position of the RBI is not just a bureaucratic initiative, but a reflection of a deep structural conflict between decentralized finance and sovereign monetary systems. India, actively developing its own digital rupee, sees cryptocurrencies as a direct competitor. However, a complete ban, as global practice shows, will only drive the market underground, increasing the share of P2P transactions and uncontrolled foreign exchanges. The Supreme Court's decision to lift the previous ban set a precedent, and this new round of confrontation could lead to lengthy legal battles, ultimately harming both investors and the economy itself.