India has roughly 39 million crypto investors. The central bank’s preferred solution is to make the whole thing illegal.
Internal documents from May and June 2026, reported by Reuters, show the Reserve Bank of India is holding firm on its long-standing prohibition stance, specifically pushing to bar banks and financial institutions from holding, trading, or taking any exposure to crypto assets and privately issued stablecoins. The RBI’s reasoning spans macroeconomic stability concerns, risks to seigniorage income, and a tax compliance picture that is, to put it generously, bleak.
The tax problem hiding in plain sight
Here is the number that explains why the RBI is frustrated. Of the 645,000 individuals who conducted crypto transactions in FY2022-23, fewer than 25% reported those activities to India’s Income Tax Department.
India introduced a 30% tax on crypto gains and a 1% Tax Deducted at Source on transactions back in 2022. Those rules are still in effect. The 1% TDS was designed specifically to create a paper trail, making it harder for transactions to disappear. The Income Tax Department has flagged offshore channels as a significant structural problem. When a trader routes activity through a foreign exchange like Binance or Coinbase or conducts bilateral trades, the transaction simply does not show up in domestic reporting systems.
