India is treading carefully on cryptocurrency regulation, with policymakers signaling they will avoid comprehensive legislation in favor of partial oversight, according to a government document reviewed by Reuters.
Financial stability takes priority
The document highlights deep concerns over financial stability, warning that granting cryptocurrencies regulatory legitimacy could accelerate their adoption and potentially make the sector “systemic.” At the same time, officials recognize that an outright ban would be ineffective, given the persistence of peer-to-peer transactions and activity on decentralized exchanges.
Stablecoins appear to be a particular flashpoint. Authorities worry that widespread use of stablecoins could weaken India’s domestic payments ecosystem, especially the Unified Payments Interface (UPI), which underpins the country’s fast-growing digital economy.
Past hesitation on crypto laws
India has flirted with stricter rules before. A proposed 2021 bill sought to ban private cryptocurrencies, but it was shelved. A planned 2024 discussion paper was also delayed, with officials saying they wanted to observe how global regulatory frameworks evolve before committing to a domestic model.
For now, crypto exchanges are permitted to operate if they register with government agencies and comply with anti-money laundering rules. Punitive taxes on crypto profits, however, continue to discourage speculative trading.
Current exposure seen as limited
According to the document, Indian residents hold around $4.5 billion worth of crypto assets. While significant, the figure is not large enough to pose an immediate threat to financial stability, regulators noted.
Still, the tone of the report underscores the government’s cautious stance: India is unlikely to rush into full-scale regulation and instead will keep digital assets at arm’s length until stronger safeguards emerge globally.
