The Reserve Bank of India’s Stance on Cryptocurrencies
The Reserve Bank of India (RBI) has once again asserted its strong opposition to the growing cryptocurrency landscape in the country, emphasizing the significant risks these digital assets present to financial stability and monetary policy. During a recent press briefing, RBI Governor Sanjay Malhotra reiterated the central bank’s longstanding reservations, declaring that while a government committee is exploring potential policy options, the watchdog continues to assess the dangers posed by cryptocurrencies.
Judicial Scrutiny and Regulatory Measures
This position from the RBI comes at a time when the Indian judiciary is urging more definitive regulatory measures. The Supreme Court has scrutinized the government’s procrastination regarding a robust regulatory framework, a situation that has led to considerable confusion in the cryptocurrency sector. A bench of justices, underlining the rapid evolution of global financial systems, has stated that outright prohibition of cryptocurrencies would be impractical.
Historical Context and Legal Challenges
The tension surrounding India’s cryptocurrency regulations traces back to a pivotal 2018 RBI directive that prohibited banks from engaging with crypto-related businesses. However, this ban faced judicial challenges and was overturned by the Supreme Court in March 2020, which ruled that it infringed on constitutional rights. The court emphasized that the prior banking restrictions were excessive and disproportionate. Subsequently, the RBI directed financial institutions to refrain from blocking crypto transactions, offering a momentary reprieve for the industry.
Concerns Over Financial Stability
Governor Malhotra’s recent remarks align with the RBI’s historical position regarding cryptocurrencies, with previous statements from former Governor Shaktikanta Das labeling digital currencies as significant threats to financial tranquillity. Das has advocated for a complete ban on cryptocurrencies, highlighting their potential for misuse, including money laundering activities.
Tax Decrees and Future Considerations
In light of these concerns, India has implemented a substantial tax regime on cryptocurrencies, introducing a 30% tax on profits alongside a 1% tax deducted at source (TDS) on trades. This places India amongst the nations with the most stringent cryptocurrency tax policies in the world. As the government committee prepares to publish a detailed policy discussion paper in June 2025, much anticipation surrounds the potential future of cryptocurrencies in India, while the judiciary continues to navigate the complex interplay between regulation and innovation in the sector.
