India is resisting comprehensive cryptocurrency regulations, fearing they could legitimize digital assets and threaten UPI’s dominance, according to a leaked government document. Instead, authorities are expected to maintain high taxes and compliance rules rather than introduce new legislation.
New Delhi: India is unlikely to introduce a comprehensive regulatory framework for cryptocurrencies anytime soon, as the government fears such a move could legitimize digital assets and destabilize the financial system. This was revealed in an internal document, dated September 2025, and reviewed by Reuters.
The paper underscores India’s cautious stance on digital assets, warning that formal regulation could fuel mainstream adoption and pose risks to the country’s flagship payment system, the Unified Payments Interface (UPI). The Reserve Bank of India (RBI), which has consistently flagged crypto’s volatility and potential misuse, reportedly backs these concerns.
Concerns Raised in the Document
The unreleased note outlines three key risks shaping India’s approach:
- Legitimacy Effect: Laws may be seen as endorsement, encouraging integration into mainstream finance. Stablecoins, in particular, could rival UPI by offering parallel systems.
- Limitations of Bans: A blanket prohibition would likely fail, given the persistence of peer-to-peer trades and decentralized exchanges (DEXs).
- RBI’s Longstanding View: The central bank reiterates that cryptocurrencies lack intrinsic value, pose money-laundering threats, and endanger monetary stability. Its earlier circulars (2018, 2022) restricting banks’ crypto exposure align with these arguments.
Policy Path So Far
India’s crypto policy has been marked by hesitancy:
- A proposed 2021 bill banning private cryptocurrencies was shelved without debate.
- During its G20 presidency in 2023, India called for a global framework but made little domestic headway.
- A 2024 policy paper on crypto risks has been delayed repeatedly, with authorities tracking U.S. developments instead.
- In August 2025, the Central Board of Direct Taxes (CBDT) sought industry input on Virtual Digital Assets (VDAs), but no major policy shift has followed.
Currently, the government relies on high taxes (30% on income, 1% TDS on transfers) and mandatory FIU-IND registration for exchanges. These measures have dampened local trading, shrinking India’s market to about $4–5 billion in 2024—far below its 2022 peak.
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Global Perspective
Unlike the U.S., which has embraced crypto ETFs and formal oversight, India is doubling down on a cautious “watch-and-wait” approach. Experts believe this reflects the government’s priority to safeguard UPI’s dominance while minimizing financial risk.
For now, stakeholders expect continuity rather than reform. The leaked document signals that India is unlikely to move beyond its patchwork of taxes and reporting rules, even as global adoption surges.
