The Reserve Bank of India (RBI) has reiterated its support for a crypto policy, which is “leaning towards prohibition,” according to internal government documents reviewed by Reuters.

They show that the institution continues to be concerned about financial stability, monetary sovereignty, and the role of privately issued stablecoins.

RBI Wants Crypto Outside Regulated Finance

According to the report, the RBI said that banks and financial institutions should be prohibited from holding, trading, or gaining any exposure to cryptocurrencies and to privately issued stablecoins (such as USDT and USDC). The bank also considers a prohibition a means of keeping digital assets outside the regulated financial system and reducing further risks.

RBI also flags stablecoins as a specific concern. The main stance is that foreign currency-pegged coins could pose a risk to domestic monetary sovereignty, while rupee-backed stablecoins could affect the government’s income from issuing fiat currency and create problems for financial stability during periods of stress.

It’s important to note that India hasn’t fully banned crypto trading. However, the sector remains in a regulatory grey zone. Major lenders generally avoid direct crypto exposure after receiving multiple warnings from the central bank, even though there is no direct prohibition on dealing in digital assets.

But that’s not all.

Tax Department Also Piles On

The country’s tax department also warned that crypto transactions are becoming a lot harder to track – in a separate statement. This is particularly true when transactions are routed through offshore exchanges, peer-to-peer rupee trades, or originate from private self-custody wallets.

The department found that fewer than a quarter of 645,000 individuals who made crypto transactions who made any kind of crypto transactions back in 2023 reported them on their tax returns.

India currently taxes crypto gains at 30%. However, overseas platforms, valuation gaps, and unclear ownership tend to complicate compliance, according to officials.

Source: CryptoPotato