The India crypto ban debate has taken its sharpest turn yet. According to a Reuters report published on July 8, 2026, the Reserve Bank of India (RBI) has thrown its weight behind banning private cryptocurrencies in its latest views submitted to the Union government, while the Income Tax (IT) Department has separately warned that Virtual Digital Assets (VDAs) carry serious tax evasion risks.
The report, filed by Reuters, is based on internal government documents seen by the news agency. The Union government itself has not disclosed a position on which way it is leaning.
What the Reuters documents reveal
The RBI’s latest submissions back a ban on private crypto assets in India. The central bank has told the Union government that managing risks tied to digital assets through regulation would be difficult, and that any formal regulation could effectively grant cryptocurrencies legitimacy and allow the sector to become systemic.
The documents also record the central bank’s assessment that while an outright ban could curb what it terms alarming risks from speculative assets, prohibition alone would not stop peer-to-peer (P2P) transfers or trading on decentralized platforms. Indian investors are estimated to hold roughly USD 4.5 billion in cryptocurrencies, an exposure the RBI describes as still limited and not yet a systemic risk to financial stability.
The Income Tax Department, through the Central Board of Direct Taxes (CBDT), has separately flagged in its submission that VDAs create structural tax evasion risks. Peer-to-peer transfers, transactions on decentralized platforms and offshore trading rely on voluntary compliance, which the tax administration finds difficult to trace or verify under the existing framework.
Report notes that the Union government has so far not indicated its direction, and that charting a uniform policy approach for crypto regulation is not straightforward given the varying paths taken by other jurisdictions.
RBI’s containment pitch, on the record
The findings sit on top of what the RBI has already argued in public over the past week. At the Parliamentary Standing Committee on Finance’s 7th sitting on July 2, 2026, RBI Deputy Governor Rohit Jain and Executive Director P. Vasudevan pitched a containment strategy leaning toward prohibition, aimed at insulating banks and regulated financial institutions from the asset class.
The central bank told the panel that cryptocurrencies are privately issued assets outside central bank control and carry risks of being used for terror funding and narcotics smuggling. It flagged that during the 2024-25 financial year, 49 crypto exchanges were registered with the Financial Intelligence Unit (FIU-IND), and that crypto transactions had repeatedly been linked to scams, online fraud, illegal gambling networks, unaccounted money transfers and peer-to-peer abuse.
The RBI has also asked policymakers to draw a firm line between private cryptocurrencies and tokenised financial assets such as government securities and corporate bonds, so that tokenisation and blockchain innovation can develop without lending legitimacy to crypto.
Committee Chairman Bhartruhari Mahtab, speaking to ANI after the sitting, confirmed that the RBI had not recommended granting legal status to cryptocurrency in India. Asked directly whether the RBI had spoken about or suggested giving crypto legal status, Mahtab’s response was a flat “No.”
Tax department: Numbers already in the record
The CBDT’s evasion warning to the government is backed by numbers already tabled before the parliamentary panel. During its January 7, 2026 sitting, the CBDT disclosed that approximately Rs 888.82 crore in undisclosed income linked to VDA transactions had been identified, with notices sent to more than 44,000 taxpayers. The Enforcement Directorate (ED) has separately uncovered unauthorized cross-border crypto transactions worth over Rs 2,500 crore.
Reporting rules have already been tightened. From April 1, 2026, crypto exchanges and platforms face a penalty of Rs 200 per day for non-reporting and Rs 50,000 for incorrect information.
The CBDT’s March 5, 2026 notification reclassified crypto assets, CBDCs and electronic money products as financial assets under India’s FATCA/CRS reporting framework, made retroactive to January 1, 2026, bringing exchanges, wallet providers and financial institutions under mandatory data-sharing with Indian and, potentially, foreign tax authorities.
Last month, the FIU-IND also directed major crypto exchanges to report over-the-counter (OTC) transactions worth more than USD 10,000, another marker of how much closer the compliance perimeter is being drawn.
The government remains undecided
Despite the RBI and CBDT positions now on the record, the Union government has not committed to either a prohibition or a comprehensive regulatory framework. A crypto policy discussion paper being prepared by a working group led by the Department of Economic Affairs (DEA), reportedly in its final drafting stages since May 2025, has been shelved at least five times, with the RBI’s persistent opposition cited as the main reason for the delays.
The Standing Committee on Finance, chaired by BJP MP Bhartruhari Mahtab, is scheduled to hear from the Department of Economic Affairs on July 15, 2026, in what is expected to be the final round of evidence before it locks in its recommendations. The report, titled “A Study on Virtual Digital Assets (VDAs) and Way Forward,” is expected to be tabled during the upcoming Monsoon Session of Parliament.
The panel has already heard the domestic and global crypto exchanges CoinDCX, Coinbase, CoinSwitch, Binance, WazirX and ZebPay, along with the FIU-IND, the CBDT, the Revenue Secretary, the Income Tax Department, the International Financial Services Centres Authority (IFSCA), the Ministry of Corporate Affairs, the ICAI, and, most recently, the RBI.
The India crypto ban question in numbers
India remains the largest crypto market in the world by user base. It has led the Chainalysis Global Crypto Adoption Index for three consecutive years, with an estimated 119 million users, yet the country still has no comprehensive law governing VDAs.
The gap is filled by a punitive tax regime. Section 115BBH of the Income Tax Act imposes a flat 30% tax on VDA gains with no loss offset. Section 194S applies a 1% Tax Deducted at Source (TDS) on every transfer above the yearly threshold of Rs 50,000 for most individual investors and Rs 10,000 for others.
An 18% Goods and Services Tax (GST) applies to trading fees. The combined effective burden pushes past 49% for top earners, a framework that Budget 2026-27 left untouched.
The migration impact has been severe. An estimated 72.7% of India’s crypto trading volume has moved to offshore platforms. During the Union Budget 2026-27 debates, MP Raghav Chadha noted that nearly 73% of VDA trading now takes place on foreign exchanges, over 180 Indian crypto startups have relocated abroad, and around 12 crore investors use offshore platforms.
The RBI’s own Central Bank Digital Currency (CBDC), i.e. the Digital Rupee (e-rupee), has crossed 150 million transactions in volume with a total value exceeding Rs 34,000 crore since its December 2022 launch. Adoption still trails badly.
The e-rupee has roughly 10 million users, or about 0.42% of India’s population, and daily transaction volumes that briefly hit 1 million in December 2023 have since dropped to around 100,000. Chairman Mahtab has publicly conceded that the RBI’s digital asset is not a flourishing asset in comparison to other digital assets.
What the India crypto ban story does not mean today
The report reflects the latest views of the RBI and the tax department on paper. It is not a policy decision, and it is not a new ban. The RBI’s containment proposal, even in its own framing, targets banks, regulated financial entities and stablecoin-based payment rails first; personal ownership and trading are not the immediate target. Prohibition remains a stated option rather than an announced measure.
Nothing in the current tax regime has changed. The 30% flat tax stays. The 1% TDS stays. The 18% GST on trading fees stays. Crypto trading remains legal for Indian residents on exchanges registered with the FIU-IND.
The Supreme Court’s March 4, 2020, ruling in Internet and Mobile Association of India v. Reserve Bank of India, which struck down the RBI’s April 2018 banking circular, still holds. Any fresh executive restriction on banks would face the same constitutional test on proportionality under Article 19(1)(g).
What has shifted is the record. With both the RBI and the CBDT now formally backing tougher measures in writing, with the Standing Committee’s report drawing close, and with a discussion paper still stuck at the DEA, the pressure on the Ministry of Finance to pick a side has never been sharper.
Also Read: India’s ‘Blockchain Yes, Crypto No’ Push Just Reached AIIMS Delhi
