RBI Calls Crypto a ‘Financial Threat’ as India Faces Legal Pressure to Regulate

India’s central bank has fired another warning shot at crypto. RBI Governor Sanjay Malhotra has once again made it clear: the central bank sees digital assets as a risk – not just to individual investors, but to the financial system itself.

The Supreme Court has also stepped in, pushing the government to finally draw the line on where crypto stands in India.

So where does that leave the country’s crypto industry? Taxed, unregulated, and still waiting for clear rules. As regulators debate behind closed doors, the gap between policy and practice keeps growing and the stakes are only getting higher.

Here’s what you should know. 

“We’re Concerned About Crypto,” Says RBI Chief

Speaking after the central bank’s monetary policy briefing on Friday, Malhotra was asked about where things stand with cryptocurrency in India.

“There is no new development as far as crypto is concerned. A committee of the government is looking after this,” he said. “Of course, as you are aware, we are concerned about crypto because that can hamper financial stability and monetary policy.”

We can’t be too surprised, though. This concern isn’t new – the RBI has been vocal about crypto risks for years. But it’s the broader context now that makes the comment more urgent.

Supreme Court Steps In: Wants a Clear Crypto Policy

Last month, the Supreme Court asked the Centre to come up with a clear policy on cryptocurrency regulation. In fact, the court went a step further, calling Bitcoin trading “more or less like hawala”, a strong comparison that signals how seriously it’s viewing the lack of oversight.

For an industry already dealing with legal trouble, this kind of framing only turns up the heat on policymakers.

India Drafting a Discussion Paper

Right now, an inter-ministerial group (IMG), which includes officials from the RBI, SEBI, and the Finance Ministry, is working on a discussion paper. The idea is to study global approaches to crypto regulation and gather feedback before setting a firm direction.

Until then, crypto in India continues to exist in a legal grey zone. It’s not banned, but it isn’t clearly allowed either.

But hold on.

Here’s where things get confusing for many: India taxes crypto gains at a flat 30%, along with TDS and GST rules. But just because it’s taxed doesn’t mean it’s legally recognized. Strange how that works. 

RBI’s Crypto Ban Was Reversed But Tensions Remain

This regulatory tug-of-war isn’t new. Back in 2021, the Supreme Court struck down the RBI’s 2018 ban that had blocked banks from servicing crypto platforms. That ruling was seen as a big win for the industry but since then, the RBI has held firm on its concerns, while actual regulation has remained out of reach.

Where Does This Leave the Industry?

India’s crypto players are still waiting for a rulebook while navigating taxes, warnings, and courtroom pressure. The RBI wants caution. The Supreme Court wants clarity. And for now, the industry is left somewhere in between.

Until that discussion paper becomes something more concrete, crypto in India stays where it’s been for a while now – stuck with high stakes and no roadmap.