India to Maintain Limited Control of Cryptocurrency

India continues to weigh its approach to digital assets, and officials are not rushing into a full-fledged cryptocurrency law. Instead, regulators are keeping a cautious grip, balancing between not fully banning crypto and not giving it legal endorsement either.

Good to Know

• Indian investors are estimated to hold around $4.5 billion in crypto.
• The government fears that stablecoins tied to the U.S. dollar could disrupt India’s payment systems.
• Current taxes and compliance rules are discouraging heavy trading activity.

The Reserve Bank of India has been particularly vocal, stressing how difficult it would be to contain risks if cryptocurrencies were formally integrated into the traditional financial system. According to internal papers reviewed by Reuters, regulators believe that granting crypto a legal framework could effectively legitimize it, something they are hesitant to do.

On the other side, a blanket ban is also seen as ineffective. Peer-to-peer trades and decentralized exchanges would continue operating regardless, making enforcement nearly impossible. That’s why India has chosen to maintain what some describe as a halfway stance—allowing crypto to exist, but with heavy restrictions and steep taxes keeping it on the margins.

Stablecoins Draw Extra Concern

Authorities are particularly wary of the global growth of stablecoins, especially those pegged to the U.S. dollar. Indian officials warn that if such tokens gained mass adoption, they could fragment settlement systems and potentially undermine India’s successful Unified Payments Interface (UPI).

The internal note also mentioned that the U.S. is considering legislation to allow regulated dollar-backed stablecoins, which could shift the balance of international payments. From India’s perspective, that would put pressure on its domestic payment ecosystem and weaken its control over currency flows.

Investors Still Active but Limited

Despite the cautious stance, crypto ownership in India is far from disappearing. Estimates suggest that locals hold around $4.5 billion worth of digital assets. While that is not enough to threaten financial stability today, officials are aware of how fast the sector can grow.

At the same time, India’s high tax regime—30% on profits plus additional levies—combined with strict compliance measures, has already driven many casual traders out of the market. For now, authorities see this as an effective way to keep speculative activity under control without imposing a full ban.