Reserve Bank of India Says Crypto Regulations Could Backfire and Legitimize the Industry

The Reserve Bank of India (RBI) has warned that introducing formal crypto regulations could end up legitimizing digital assets and exposing the country’s financial system to significant risks. According to documents reviewed by Reuters, the central bank maintains that regulating cryptocurrencies would be difficult to enforce and may encourage broader adoption, making the sector systemic.

The RBI has long expressed concerns about the speculative nature of cryptocurrencies, arguing that only an outright ban could effectively reduce the dangers associated with digital assets. However, even a ban would not stop peer-to-peer transfers or trading on decentralized exchanges, highlighting the regulatory challenges India continues to face.

India currently lacks a comprehensive regulatory framework for crypto but has introduced strict measures. A 30% tax on digital asset gains remains in place, alongside a requirement for foreign exchanges to register with local regulators. Toward the end of 2023, India’s Financial Intelligence Unit (FIU) ordered blocks on several global exchanges, including Binance, Kraken, KuCoin, and Bitfinex, for failing to comply. Binance and KuCoin were later allowed to resume services in 2024 after meeting FIU standards. Domestic crypto firms are also required to follow Anti-Money Laundering (AML) rules.

Despite regulatory hostility, India leads the world in crypto adoption. The 2025 Geography of Crypto Report by Chainalysis ranked the country at the top across all categories. Even government officials have revealed holdings—Minister Jayant Chaudhary disclosed his crypto portfolio rose 19% to $25,500.

Industry leaders caution that there remains a wide gap between adoption metrics and actual usage. Mithil Thakore, CEO of Velar, described India’s crypto landscape as “a paradoxical crossroads,” where regulatory uncertainty collides with one of the highest global adoption rates.