1India’s ongoing struggle with cryptocurrencies is back in the spotlight. The Reserve Bank of India (RBI) has warned that bringing in full crypto rules might create bigger problems instead of solving them.A recent Reuters report says the RBI believes that if cryptocurrencies are regulated, people may see them as officially approved, which could make them a big risk for the entire financial system.This warning is important because India is a major player in the global crypto market. Reports suggest that more than 100 million Indians own some form of cryptocurrency, making the country one of the leaders in digital asset adoption.What India decides to do will not only affect its own investors but could also influence how other countries shape their crypto policies. Many emerging markets are watching closely to see how India handles the future of cryptocurrencies.India’s Current Stance on CryptoIndia does not yet have clear rules for digital assets, but strict taxes and restrictions already affect the market. Investors must pay a 30% tax on profits from crypto trades and a 1% TDS on transactions. These rules have reduced activity on local exchanges.In late 2023, the Financial Intelligence Unit (FIU) blocked several global exchanges including Binance, KuCoin, Kraken and Bitfinex for not registering under India’s anti-money laundering rules. In 2024, Binance and KuCoin were allowed back after they secured FIU approval and agreed to follow stricter compliance measures.Despite these hurdles, crypto adoption in India continues to grow. The 2025 Geography of Crypto Report by Chainalysis ranked India as the number one country for crypto adoption across several categories. Even government officials are involved. Minister Jayant Chaudhary reported that his crypto portfolio grew 19 percent last year, reaching about 25,500 dollars.This shows the big contrast between strict government policies and the strong interest of Indian citizens in digital assets.RBI’s Warning – Legitimization as a RiskAccording to the Reuters report, the Reserve Bank of India believes that bringing in rules for cryptocurrencies could make people think they are officially approved. This would give them a sense of legitimacy that the RBI sees as risky.If crypto is treated as part of the mainstream system, it could grow large enough to affect wider financial markets and even create instability in the economy.The central bank also noted that a complete ban on cryptocurrencies might sound like a solution, but it would still be very hard to stop people from trading directly with each other or using decentralized platforms.This careful approach reflects the RBI’s long-standing concern that digital assets threaten monetary sovereignty. With the rupee already facing global economic pressure, the bank views crypto as a possible competitor to its control over money and financial stability.Related: Japan’s Finance Minister: Crypto Can Play a Role in Diversified PortfoliosExpert Commentary: Insights & ComparisonsIndia’s caution about crypto is not new and is similar to its past financial history. Gold was restricted from the 1960s to the 1990s, but black markets still existed until it became legal. Foreign exchange trading also moved from strict controls to more open reforms. Cryptocurrencies might follow the same path, starting with strict rules but gradually becoming more accepted because of global competition and market demand.Investor behavior is also important. Bitcoin’s past price rises have been driven by institutional adoption and clear regulations, especially during halving cycles from 2012 to 2020. In India, unclear rules create uncertainty and push investors to use foreign exchanges or informal trading. This actually weakens the protections the RBI wants to provide.India’s strict approach could also cause a loss of innovation. Since 2022, many Web3 startups have moved to countries like Dubai, Singapore, and Europe where rules are clearer. Other regions, like the EU and UAE, are encouraging crypto growth. If India keeps delaying, it may lose talent, influence, and leadership in the global crypto market, while its own industry faces risks from unregulated activity.
