The Reserve Bank of India (RBI) has told the Parliamentary Standing Committee on Finance that virtual digital assets (VDAs) such as cryptocurrencies threaten the economy and should not be legalised, Inc42 reported. The central bank presented its position at the committee’s July 2 sitting, chaired by BJP MP Bhartruhari Mahtab. The meeting, attended by the Institute of Chartered Accountants of India (ICAI), examined “A Study on Virtual Digital Assets (VDAs) and Way Forward,” a subject the panel took up in 2025.
What did the RBI propose? According to a report by The Economic Times cited by Inc42, the RBI pitched a containment strategy leaning towards prohibition to insulate banks and regulated financial institutions from the asset class. The RBI made the following arguments before the panel:
- Cryptocurrencies are privately issued assets outside central bank control and carry the risk of being used for terror funding and narcotics smuggling.
- Governing crypto held by offshore entities is difficult and challenges regulatory authorities.
- Countries like Qatar and China have banned crypto activity outright, while European jurisdictions permit it only under stringent regulation.
The RBI also criticised stablecoins—crypto tokens pegged to fiat currencies such as the US dollar, arguing they undermine monetary sovereignty, and said users should instead adopt the central bank digital currency (CBDC), or digital rupee, which the RBI issues and backs with the rupee. A committee member told Business Standard that RBI officials did not immediately respond to a question on whether they could treat VDAs as securities rather than currency, and said they would reply in writing.
MediaNama’s take: The RBI’s financial-stability case is coherent; private crypto is volatile, hard to supervise, and a genuine channel for illicit flows, so keeping it out of the banking system makes real sense. The problem is that containment answers a question the market has already moved past:
- The RBI wants to ring-fence a system much of the activity has already left. The bank concedes it cannot easily reach crypto held through offshore entities, yet containment aimed at domestic banks does little about the users who have moved there. The government has itself admitted it has no real-time system to track crypto transactions, so walling off banks disciplines the compliant onshore minority while the rest stays out of view.
- Containment sits against a market the state already taxes and counts. According to the government’s own figures presented to the committee, India has 54 Financial Intelligence Unit (FIU)-registered providers and nearly 39.3 million verified users holding around Rs 20,437 crore. A market that large, already subject to a 30% tax, is one that the state has, in practice, acknowledged, even as the RBI resists granting it legal status.
- The alternative it offers has not landed. Containment relies on users migrating to the digital rupee, but adoption of the CBDC has remained limited amid the dominance of the Unified Payments Interface (UPI) since its December 2022 launch. A strategy that depends on a substitute users have not adopted is asking the market to move where it has declined to go.
The RBI is also not the only regulator shaping the answer. The Securities and Exchange Board of India (SEBI) has signalled that it could regulate VDAs if they are treated as securities, an opening the RBI’s blanket containment does not accommodate. That is the fault line the committee’s report will sit on: whether India regulates crypto by isolating it, or by dividing oversight across the agencies now staking competing claims.
Where does the ICAI stand? The ICAI, which appeared before the committee the same day, took a different view, backing a clearer legal framework for VDAs rather than containment.
How does this fit India’s wider crypto stance? India taxes VDA gains at 30% with a 1% tax deducted at source (TDS) on transfers, yet has no comprehensive law governing trading, exchanges or investor protection, a divergence that taxes and monitors crypto without recognising it. The RBI’s containment pitch echoes its 2018 circular barring regulated entities from crypto dealings, which the Supreme Court struck down in 2020.
The court has since pressed the government on the regulatory vacuum. Foreign exchanges including Binance and Coinbase have re-entered the Indian market in recent months after registering with the FIU. Mahtab said the committee will soon issue its report on the deliberations.
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