India’s central bank wants crypto gone. The Reserve Bank of India has doubled down on its preference for a prohibition-leaning policy toward digital assets, a stance that could directly impact roughly 39 million crypto traders in the country holding an estimated $2.1 billion in digital assets.

The RBI’s long war on crypto

The RBI tried this before, issuing a circular in 2018 that effectively banned banks from dealing with cryptocurrency businesses. Then in 2021, the Supreme Court overturned the banking ban, ruling it unconstitutional. Crypto trading roared back to life, though the government made sure it wasn’t exactly comfortable.

India slapped a flat 30% tax on crypto gains. On top of that, a 1% Tax Deducted at Source applies to every transaction, meaning every time you sell crypto in India, the government takes a cut before you even see the money.

Tax compliance is a mess

Less than 25% of crypto traders in India filed their taxes accurately for the financial year ending March 2023. That means roughly three out of four crypto holders in the country are either underreporting or not reporting at all.

Offshore platforms make enforcement particularly tricky. Indian traders can access global exchanges that operate outside the country’s jurisdiction, making it nearly impossible for regulators to track transactions or collect taxes. The RBI has cited risks including terror financing and money laundering as justification for its prohibition stance.

The central bank has also advised banks and financial institutions to avoid facilitating transactions involving cryptocurrencies or private stablecoins.

The adoption paradox

India ranked first in the Chainalysis 2025 Global Crypto Adoption Index. The RBI disputes the methodology behind that ranking. Parliamentary debates in India have reflected the tension between enforcement hawks who align with the RBI and lawmakers who recognize that nearly 40 million constituents are actively engaged in crypto markets.

What this means for the global crypto market

The RBI’s warning about private stablecoins deserves particular attention. India’s central bank has been developing its own digital rupee, and banning private stablecoins would conveniently eliminate competition for that project.

The tension between the RBI’s prohibition preference and the Supreme Court’s 2021 precedent means any ban would almost certainly face legal challenges. The 2018 circular was overturned once, and a second attempt would carry the burden of that history. Until India establishes a cohesive regulatory framework, one that moves beyond punitive taxation and vague advisories, its crypto market will remain stuck in a gray zone that serves neither investors nor regulators particularly well.