Blab Crypto
RBI Urges Ban on Cryptocurrencies as Parliamentary Panel Reviews Virtual Digital Assets
On July 2, 2026, the Reserve Bank of India (RBI) made a decisive statement to a parliamentary standing committee on finance: it opposes the legalization of cryptocurrencies and other virtual digital assets (VDAs). The central bank warned that the rise of private digital currencies poses serious risks of illicit use, regulatory challenges, and a threat to India’s monetary sovereignty.
In its briefing, the RBI pointed out that several countries—including Qatar and China—have already prohibited all cryptocurrency activity, while many European states have introduced stringent regulatory regimes. The bank cautioned that privately issued digital assets, unlike fiat currencies, can be exploited for terror financing, narcotics smuggling, and other illegal activities. It also highlighted the difficulty of supervising crypto holdings that are held by offshore entities.
The RBI’s position on stablecoins was equally explicit. The bank said that stablecoins, which are pegged to fiat currencies, undermine India’s monetary sovereignty because they are not backed by the rupee. Instead, the RBI urged users to adopt a central bank digital currency (CBDC) that would be issued by the RBI and backed by the rupee.
"We are leaning towards a containment strategy that could culminate in a prohibition of VDAs to protect banks and regulated financial institutions from the risks posed by the asset class," the RBI said, according to a report by the Economic Times.
The parliamentary committee, chaired by MP Bhartruhari Mahtab, is conducting its seventh review of VDAs. Earlier this year, the committee met with the Income Tax Department to discuss the possibility of using VDAs to move funds outside regulated intermediaries. The committee is expected to release a report that will consider inputs from industry bodies, regulators, and the RBI.
India’s regulatory environment for cryptocurrencies remains a grey area. While the country has no dedicated legal framework for VDAs, gains from crypto trading are taxed at 30% under the Income Tax Act 2025. The RBI has also disputed claims that India is one of the world’s largest adopters of digital assets, arguing that private analytics firms overstate adoption figures.
In recent months, several other regulatory actions have tightened the crypto noose. The Maharashtra government classified crypto assets under the Protection of Interest of Depositors Act, allowing authorities to attach, seize, and liquidate crypto property in fraud cases. The Enforcement Directorate (ED) conducted searches at six locations in Bengaluru in June as part of an investigation into alleged violations of the Foreign Exchange Management Act (FEMA) involving cross‑border transfers through virtual digital assets.
Foreign exchanges such as Binance and Coinbase have re‑entered the Indian market after registering with the Financial Intelligence Unit (FIU) and implementing enhanced know‑your‑customer (KYC) and reporting rules. These exchanges now operate under stricter compliance requirements designed to ensure transaction traceability.
The RBI’s remarks come amid a global trend of stricter regulation. China has banned decentralized cryptocurrency transactions and is actively developing its own state‑backed digital currency, the e‑CNY. Qatar’s financial centre has also prohibited all virtual currencies, including major tokens such as Bitcoin, Ethereum, and stablecoins.
The committee’s upcoming report will likely address whether India should adopt a prohibition, a containment strategy, or a regulated framework for VDAs. The RBI’s position, combined with recent state‑level legislation and enforcement actions, suggests a cautious approach that prioritises financial stability and anti‑money‑laundering objectives.
As the debate continues, stakeholders will watch for any formal regulatory framework that could clarify the legal status of cryptocurrencies, stablecoins, and other digital assets in India. The outcome will have implications for domestic exchanges, foreign entrants, and the broader digital‑asset ecosystem.
In its briefing, the RBI pointed out that several countries—including Qatar and China—have already prohibited all cryptocurrency activity, while many European states have introduced stringent regulatory regimes. The bank cautioned that privately issued digital assets, unlike fiat currencies, can be exploited for terror financing, narcotics smuggling, and other illegal activities. It also highlighted the difficulty of supervising crypto holdings that are held by offshore entities.
The RBI’s position on stablecoins was equally explicit. The bank said that stablecoins, which are pegged to fiat currencies, undermine India’s monetary sovereignty because they are not backed by the rupee. Instead, the RBI urged users to adopt a central bank digital currency (CBDC) that would be issued by the RBI and backed by the rupee.
"We are leaning towards a containment strategy that could culminate in a prohibition of VDAs to protect banks and regulated financial institutions from the risks posed by the asset class," the RBI said, according to a report by the Economic Times.
The parliamentary committee, chaired by MP Bhartruhari Mahtab, is conducting its seventh review of VDAs. Earlier this year, the committee met with the Income Tax Department to discuss the possibility of using VDAs to move funds outside regulated intermediaries. The committee is expected to release a report that will consider inputs from industry bodies, regulators, and the RBI.
India’s regulatory environment for cryptocurrencies remains a grey area. While the country has no dedicated legal framework for VDAs, gains from crypto trading are taxed at 30% under the Income Tax Act 2025. The RBI has also disputed claims that India is one of the world’s largest adopters of digital assets, arguing that private analytics firms overstate adoption figures.
In recent months, several other regulatory actions have tightened the crypto noose. The Maharashtra government classified crypto assets under the Protection of Interest of Depositors Act, allowing authorities to attach, seize, and liquidate crypto property in fraud cases. The Enforcement Directorate (ED) conducted searches at six locations in Bengaluru in June as part of an investigation into alleged violations of the Foreign Exchange Management Act (FEMA) involving cross‑border transfers through virtual digital assets.
Foreign exchanges such as Binance and Coinbase have re‑entered the Indian market after registering with the Financial Intelligence Unit (FIU) and implementing enhanced know‑your‑customer (KYC) and reporting rules. These exchanges now operate under stricter compliance requirements designed to ensure transaction traceability.
The RBI’s remarks come amid a global trend of stricter regulation. China has banned decentralized cryptocurrency transactions and is actively developing its own state‑backed digital currency, the e‑CNY. Qatar’s financial centre has also prohibited all virtual currencies, including major tokens such as Bitcoin, Ethereum, and stablecoins.
The committee’s upcoming report will likely address whether India should adopt a prohibition, a containment strategy, or a regulated framework for VDAs. The RBI’s position, combined with recent state‑level legislation and enforcement actions, suggests a cautious approach that prioritises financial stability and anti‑money‑laundering objectives.
As the debate continues, stakeholders will watch for any formal regulatory framework that could clarify the legal status of cryptocurrencies, stablecoins, and other digital assets in India. The outcome will have implications for domestic exchanges, foreign entrants, and the broader digital‑asset ecosystem.
