India hosts approximately 39 million crypto investors. The Reserve Bank of India maintains a strict stance against cryptocurrencies, advocating for a ban on banks and financial institutions engaging with these assets. As outlined in recent documents from May and June 2026, the RBI's concerns include macroeconomic stability, risks associated with seigniorage income, and significant issues with tax compliance.
The tax compliance landscape reveals a worrying trend for the RBI. In the fiscal year 2022-23, only about 25% of 645,000 individuals who engaged in crypto transactions reported them to the Income Tax Department. This raises questions about enforcement and compliance. In 2022, India introduced a 30% tax on crypto gains and a 1% Tax Deducted at Source on transactions to address these issues, specifically to create a better tracking mechanism for digital asset transactions. Yet, substantial routing of trades through foreign exchanges, such as Binance and Coinbase, complicates domestic reporting, avoiding scrutiny by local tax authorities.
How does SEBI view the situation?
In contrast to the RBI, the Securities and Exchange Board of India expresses a willingness to establish a regulatory framework for cryptocurrencies rather than impose an outright ban. This discrepancy places two significant financial regulators in direct opposition regarding crypto regulation strategies. The RBI has sought strict measures since its initial ban on banks supporting crypto businesses in 2018, which was overturned by the Supreme Court in 2020 due to unconstitutionality. Since the 2021 draft bill proposed a ban, no further legislative measures have emerged, leaving the legislative landscape stagnant.
What is the impact on India's crypto investors?
As of May 2026, around 39 million investors hold approximately $2.1 billion in crypto assets. If the RBI’s position becomes concrete policy, it could significantly impede the capacity of banks and financial institutions to provide custody services, engage in crypto lending, or even operate stablecoin settlement systems.
In comparison to the United States, which is actively moving toward stablecoin legislation, India currently leans more towards China's outright prohibition with a rigid stance from the RBI. However, the judiciary has previously countered the RBI's attempts to restrict banking access to cryptocurrencies.
Until the Indian Parliament enacts new crypto legislation, the RBI's recommendations and SEBI's proposals may unfold while 39 million investors continue to operate largely outside the tax framework. This scenario poses considerable challenges regarding compliance and regulatory oversight, creating an environment fraught with uncertainties for investors navigating the evolving crypto space.