Economy & Banking★ Must Know

RBI Reiterates Push for Cryptocurrency Prohibition, Citing Financial and Tax Risks

By TestNeeti Editorial TeamPublished Wednesday, 8 July 2026 3 min readSource: MintArticle 2 of 20

The Reserve Bank of India (RBI) has reiterated that India's cryptocurrency policy should move towards a 'prohibition' approach, while the income tax department warned that crypto transactions via offshore platforms are hard to monitor and tax, according to government documents cited by Reuters. The RBI suggested that banks and financial institutions should not be allowed to hold, trade or gain exposure to cryptocurrencies and privately issued stablecoins, warning that tokens tied to foreign currencies could challenge India's monetary independence. India currently taxes crypto profits at 30%. Tax authorities estimate India had nearly 39 million crypto traders holding around $2.1 billion in digital assets by the end of May, but found that fewer than a quarter of the 645,000 people who transacted in the year to March 2023 reported it in their tax filings.

Key Facts & Details

9 points

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The RBI reiterated that India's crypto policy should shift towards 'prohibition', per government documents cited by Reuters.
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The central bank suggested banks and financial institutions should not hold, trade or gain exposure to cryptocurrencies and private stablecoins.
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The RBI warned that stablecoins linked to foreign currencies could undermine India's monetary independence and revenue from currency issuance.
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The income tax department flagged that offshore exchanges, private wallets and peer-to-peer platforms make crypto hard to trace and tax; India taxes crypto profits at 30%.
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Estimates put India at nearly 39 million crypto traders holding about $2.1 billion in digital assets by end-May, with weak tax reporting.
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Fewer than a quarter of the 645,000 individuals who transacted in crypto in the year to March 2023 reported it in their income-tax returns.

Deep Dive

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Crypto has operated in a regulatory grey area in India since 2018, when the Supreme Court overturned an RBI banking restriction; a 2021 draft bill to ban private cryptos was never introduced in Parliament.
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In internal discussions in September, the Finance Ministry, after consulting the RBI, had supported limited regulatory clarity — highlighting an unresolved tension between innovation and risk.
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Globally, Japan and Singapore have adopted regulatory frameworks while China has banned crypto use, illustrating divergent policy approaches.

Exam Focus

What policy approach to cryptocurrencies has the RBI reiterated it favours, and at what rate does India tax crypto profits?

Exam Relevance & Angle

The RBI's stance on crypto is a core banking-awareness and economy GA theme. Aspirants should note the push for prohibition, the concern over stablecoins and monetary independence, and the 30% tax on crypto gains — recurring points in questions on virtual digital assets and financial stability.

Target Exams

SBI POSBI ClerkIBPS POIBPS ClerkRBI Grade BNABARD Grade ASSC CGLUPSC CSE

Background & Context

Cryptocurrencies are decentralised digital assets recorded on blockchain networks, outside the control of any central bank. In India they have operated in a legal grey area since 2018, when the Supreme Court struck down an RBI circular that had barred banks from servicing crypto businesses. A 2021 draft bill proposing to ban private cryptocurrencies was never tabled, and India has since taxed crypto gains at a flat 30% with a 1% TDS, without a full regulatory framework. Stablecoins are crypto tokens pegged to assets such as the US dollar. The RBI has consistently flagged risks to monetary sovereignty, financial stability and consumer protection, and promotes its own CBDC (Digital Rupee) as a sovereign alternative.