The RBI told the Standing Committee on Finance that outright prohibition is still on the table. The Union government's next move comes on 15 July, and 39 million retail investors are watching what happens to a $2.1 billion holding that never got a proper legal framework.
The Reserve Bank of India told the Parliamentary Standing Committee on Finance last week that outright prohibition of cryptocurrencies is still on the table. Deputy Governor Rohit Jain and Executive Director P. Vasudevan presented the central bank's position at the committee's 2 July sitting, arguing for a containment strategy that would bar regulated financial institutions from any exposure to crypto and privately issued stablecoins.
The submission is the strongest signal yet that the RBI is prepared to walk away from the middle path most observers assumed India was heading toward. India has 39 million retail crypto investors holding around $2.1 billion in digital assets, on the RBI's own reading of the data. None of that trade has ever operated inside a formal regulatory framework. What the RBI has now told lawmakers is that it doesn't want one built.
The pitch to the committee, chaired by BJP MP Bhartruhari Mahtab, framed prohibition as consistent with international practice rather than an outlier position. Central bank officials pointed to Financial Stability Board and IMF guidance that treats prohibition as a legitimate policy tool for jurisdictions worried about capital flight, monetary sovereignty, or illicit finance. The Standing Committee is scheduled to hear the Department of Economic Affairs on 15 July, in what is expected to be the final evidence session before the panel drafts its recommendations.
The RBI's argument leans on a specific claim. During the 2024-25 financial year, 49 crypto exchanges registered with the Financial Intelligence Unit, and the central bank told the committee that transactions running through those platforms had been repeatedly linked to scams, online fraud, illegal gambling networks, unaccounted money transfers and peer-to-peer abuse. The Income Tax Department, appearing at the same hearing, added its own warning that Virtual Digital Assets carry structural tax-evasion risks that current enforcement tools cannot reach at scale.
Where the RBI has hardened is on stablecoins. In its background note the central bank explicitly opposed banks' exposure to both foreign and rupee-pegged stablecoins, warning of financial contagion, loss of seigniorage, and stress during market turmoil. That closes off the compromise route Indian fintech had quietly lobbied for: a licensed rupee stablecoin operating inside the banking perimeter, on the model Circle and Paxos have built in the United States. The RBI does not want that instrument to exist domestically at all.
The central bank also warned Parliament away from the softer regulatory approach that some legal commentators had been floating. Applying conventional securities or commodities regulation to crypto, the RBI said, would legitimise speculative products with "no beneficial economic impact" and create a "false perception of safety" among retail users. It is unusually direct language for a submission to a parliamentary committee, and it lines up with the Governor's public speeches on the topic over the past year.
None of this is a done deal. The Union government has not committed to either prohibition or a comprehensive framework, and the Standing Committee's recommendations are not binding. The Ministry of Finance has consistently taken a more accommodative line in public than the RBI, and the tax regime already treats crypto gains as legally earned income at a 30 per cent flat rate; that is difficult to square with a policy of outright prohibition on the underlying asset. A ban would also strand the FIU-IND registration process the RBI itself referenced in its evidence.
The direction of travel is now clearer than it was a week ago. India has spent five years signalling that it might build something workable and then declining to do so. The Supreme Court struck down the RBI's 2018 banking ban in 2020 after a long court battle, the government has repeatedly floated federal legislation that never made it to a vote, and the central bank has never publicly moved off its opposition. The current round differs mainly in that the machinery of parliamentary process is running to a defined timetable.
If the Standing Committee endorses the RBI's line, the result will not be a headline prohibition tomorrow. It will be a policy report that gives the RBI cover to keep tightening the banking perimeter around crypto through supervisory guidance, the same mechanism it used before 2020, while the legislative debate stretches into 2027. Indian exchanges have already spent one cycle operating on the assumption that they could survive without formal legalisation. Whether the platforms holding that $2.1 billion of retail capital can survive a second is a different question.
The Department of Economic Affairs testifies on 15 July.
