India is leaning against creating comprehensive crypto legislation, arguing that regulating the asset class would grant it "legitimacy," Reuters reported on Wednesday.
The country, whose populace tops global crypto adoption trends according to Chainalysis, is instead likely to maintain partial oversight, concerned that integrating digital assets into its financial system could pose "systemic risks," according to a government document prepared this month and seen by the outlet.
The document reportedly cites the Reserve Bank of India's position that effectively regulating cryptocurrencies would be challenging. It also noted that although an outright ban could address the "alarming" risks of largely speculative crypto assets, it would not stop peer-to-peer transfers or activity on decentralized exchanges.
Currently, global exchanges may operate in India if they register with a local agency for anti–money laundering checks; however, heavy taxes on crypto gains and repeated central bank warnings have kept trading within the formal financial system minimal. Indians hold around $4.5 billion in crypto, according to the document, an amount the government stated is neither significant nor a threat to financial stability.
The document also noted that limited regulatory clarity has so far contained risks, with tax and other laws deterring speculation and penalizing fraud. Still, it stresses that with approaches differing worldwide, setting a clear or uniform policy path for cryptocurrencies is not straightforward.
The Indian government previously drafted legislation in 2021 aimed at banning private cryptocurrencies, though it ultimately decided against introducing the bill. India then called for a global framework to regulate digital assets in 2023 and planned a discussion paper on its stance the following year, but deferred it to assess U.S. regulatory developments first.
Elsewhere, the global acceptance of cryptocurrencies has generally improved since pro-crypto U.S. President Donald Trump took office in January. Trump recently signed new stablecoin legislation into law, while bipartisan efforts continue on a market structure bill. Governments in the UK, EU, Hong Kong, and South Korea are also looking to bolster their crypto regulatory frameworks.
The Block reached out to India's Ministry of Finance and the RBI for comment.
