- India resists full crypto regulation, citing systemic risks and legitimacy fears
- RBI maintains regulation cannot fully contain risks tied to crypto assets
- Exchanges allowed if registered; heavy taxes and RBI warnings still apply
India is leaning towards maintaining partial oversight on cryptocurrencies rather than introducing full legislation to regulate cryptocurrencies, according to a government document seen by Reuters.
Officials argue that creating a comprehensive framework could inadvertently grant legitimacy to digital assets, raising systemic financial risks.
RBI: Regulation Won’t Solve Crypto Risks
The Reserve Bank of India (RBI) has maintained that regulation cannot effectively contain the risks tied to speculative crypto assets. India’s stance now sits between that of the West and other Asian counterparts.
For instance, since Donald Trump took office for the second time as President early this year, the United States has passed legislation to approve the wider use of stablecoins. That, and other crypto-friendly postures by the US, have led to an improved rate of crypto acceptance worldwide.
Related: How Can Crypto Save the Indian IT Industry Against Trump’s Actions?
Meanwhile, cryptocurrency remains banned in China despite the Asian giant’s consideration for a Yuan-backed stablecoin, while Japan is developing a local regulatory framework for such virtual assets. Like India, Japan has adopted a cautious posture and does not want to promote the sector actively.
Legitimacy Seen as a Risk
The situation in India is rather complex, considering the content of the government’s latest official document on the matter. According to the document, regulating cryptocurrencies in India would grant them “legitimacy” and “may cause the sector to become systemic.”
Meanwhile, although an outright ban could tackle the “alarming” risks from largely speculative crypto assets, the document claims it would not be able to tackle peer-to-peer transfers or trades on decentralized exchanges.
Current Rules Still Restrictive
It is crucial to note that the current situation in India allows crypto exchanges to operate within the region only after registering with a government agency tasked with due diligence to check money laundering risks.
India also imposes punitive taxes on gains from cryptocurrency transactions, while the central bank continues to warn citizens about the risks associated with cryptocurrency trading.
Related: How the Fast-Growing Indian Economy Is Leading The Way in Crypto Adoption?
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