The Governor of the Reserve Bank of India, Sanjay Malhotra, has reiterated deep concerns over the unregulated growth of cryptocurrencies, warning that digital assets could undermine the country’s financial stability and interfere with the effectiveness of monetary policy.
Speaking at a press briefing following the RBI’s monetary policy review, Governor Malhotra emphasized the central bank’s persistent unease with the speculative and decentralized nature of cryptocurrencies, which he said continue to pose macroeconomic risks.
“We are concerned about crypto because that can hamper financial stability and monetary policy,” Malhotra stated, signaling that while there are no immediate regulatory changes, the issue remains a top priority for financial authorities.
No Legal Ban, But No Legal Status
India’s position on cryptocurrencies remains ambiguous. While not banned outright, digital currencies like Bitcoin and Ethereum operate in a regulatory vacuum. In 2022, the Indian government imposed a 30% tax on capital gains from crypto transactions and mandated 1% TDS (tax deducted at source) on each trade—measures that many interpreted as an attempt to discourage retail participation without enforcing a formal ban.
Despite the taxes, cryptocurrencies have yet to be granted legal recognition, and digital asset service providers remain outside the purview of dedicated financial regulation. Cryptocurrency transactions are, however, subject to India’s anti-money laundering and tax laws.
Supreme Court Weighs In, Government Responds
The Supreme Court of India recently voiced its own apprehension regarding the lack of regulatory clarity, likening crypto trading to hawala—an informal and often illegal value transfer system. The court urged the central government to develop a cohesive framework to address the growing use of digital assets.
In response, a government-appointed inter-ministerial group (IMG), comprising officials from the Ministry of Finance, RBI, and the Securities and Exchange Board of India (SEBI), has begun work on a discussion paper. The paper will evaluate global best practices and seek stakeholder input, paving the way for a formal policy framework on virtual digital assets.
A senior Finance Ministry official noted that India is observing how other jurisdictions—particularly the European Union and the United States—are structuring their crypto regulations to strike a balance between innovation and systemic risk management.
RBI’s Stance: Digital Rupee, Not Decentralized Currencies
The RBI’s wariness of private digital currencies stands in contrast to its growing push for India’s official digital currency—the Digital Rupee—which is being rolled out in a phased manner. The central bank sees sovereign digital currencies as tools for enhancing payment efficiency without compromising monetary control.
“The future of digital finance must be anchored in central bank-backed instruments,” a senior RBI official said, underscoring that decentralized cryptocurrencies lack the oversight and accountability required for long-term economic sustainability.
As India approaches a pivotal moment in shaping its digital financial future, the message from its central bank remains clear: while the technology behind crypto may hold promise, its current form—unregulated, volatile, and opaque—carries risks too significant to ignore.