India is taking a careful path when it comes to cryptocurrency and digital assets. Instead of passing strong laws that regulate every part of this market, the government prefers limited oversight. Leaders worry that giving full recognition to cryptocurrencies could make them part of the financial system in unsafe ways. A report seen by Reuters shows that the Reserve Bank of India, also known as the RBI, believes controlling the risks through regulation would be very difficult. Officials fear that too much control could bring more harm than good, creating systemic risks that might spread through banks and payment systems.
Some countries are moving in a different direction. Japan and Australia are building frameworks to regulate digital assets step by step. China continues its ban on cryptocurrencies but is looking at a digital yuan stablecoin. The United States has passed a law called the GENIUS Act, which supports the use of stablecoins. Stablecoins are cryptocurrencies tied to real-world money like the US dollar. They are designed to avoid wild price swings, but they can still change value during market shocks or when liquidity dries up. This is why regulators in many countries, including India, watch them closely.
Stablecoins raise special concerns for India. The government worries that if stablecoins become popular, they could weaken the Unified Payments Interface, known as UPI. UPI is the backbone of India’s fast-growing digital payment system. A wide use of stablecoins might fragment the system, making it harder for the RBI to maintain control over payments. Officials also fear that stablecoins, even if tied to the dollar, could bring outside pressure into India’s economy.
At the same time, the government does not want to ban cryptocurrencies completely. A ban might block some risks, but it would not stop peer-to-peer transfers or decentralized exchange trades. These types of crypto activity are hard to monitor or stop. Instead, India prefers to require global crypto exchanges to register locally. Exchanges must face strict checks to prevent money laundering and fraud. This approach limits risks without making cryptocurrencies part of the country’s main financial system.
Taxes are another tool India uses to manage the crypto market. The government set punitive taxes on cryptocurrency gains. These heavy taxes act as a warning against speculative trading. The goal is to reduce risky bets while avoiding damage to the wider financial system. Even with these barriers, Indians hold about $4.5 billion worth of cryptocurrencies. This number shows growing interest but is still small compared to the country’s overall economy. Regulators say it does not yet pose a systemic risk to financial stability.
Global actions also shape India’s policy. The U.S. decision to regulate stablecoins may affect both advanced economies and emerging ones like India. As stablecoins grow in popularity, their impact on payment systems and economies will increase. India needs to assess carefully how much stablecoins could affect its financial security and national payment backbone. Different countries are taking different paths. While the United States is moving toward more formal rules, India wants to wait and see how these rules play out before deciding on its own framework.
This wait-and-see approach has a history. Back in 2021, India prepared a bill to ban private cryptocurrencies, but it chose not to pass it. During its G20 presidency in 2023, India called for a global framework to regulate virtual assets. In 2024, the government had planned to release a discussion paper on crypto regulation but decided to postpone it. Officials wanted to see more clarity from the United States and other leading economies before making decisions at home.
The RBI and the federal finance ministry have not given public comments about these plans. Still, the cautious tone of the government is clear. India is not rushing into cryptocurrency regulation. It is balancing the risks of crypto adoption with the stability of its financial system. By focusing on limited oversight, strict checks on exchanges, and high taxes on gains, India is trying to prevent systemic risks while keeping its payment networks strong. This strategy shows how India differs from countries like Japan, Australia, China, and the U.S., each of which is testing different ways to handle the fast-growing world of digital assets and stablecoins.
