India stablecoins are facing fresh pressure after the country’s central bank cautioned banks against dealing with crypto and stablecoins.
The Reserve Bank of India wants local financial lenders and firms barred from exposure to privately issued stablecoins, including rupee-backed tokens, Reuters has learned, citing government documents.
That includes stablecoins tied to foreign currencies as well as tokens linked to the Indian rupee, the report said.
Read also: USDT India Premium Tops 8.5% Amid Local Crackdown
The central bank reportedly warned that foreign-currency stablecoins could threaten domestic monetary sovereignty, while rupee-backed tokens could reduce the government’s income from issuing its own currency, thereby create risks during market stress.
The central bank also reasserted that India’s policy should be “leaning towards prohibition,” per the report.
India Crypto Tax Risks Add Pressure
The tax authority of India has also warned in government papers reviewed by Reuters that crypto transactions are difficult to track since traders transfer funds via offshore exchanges and peer-to-peer trades in rupees.
India has nearly 39 million crypto traders who held about $2.1 billion in cryptocurrencies at the end of May, according to estimates cited by Reuters.
But the tax department found that fewer than a quarter of the 645,000 people who made crypto transactions in the financial year that ended in March 2023 reported them on their tax returns.
Crypto platforms like Binance and Coinbase can operate in India after getting registered with the relevant government body. However, recent documents seem to be signaling the authorities’ intent to impose more restrictions rather than granting permissions.
Read more: The Stablecoin Wars: Which Regulations Will Create the Next Winners and Losers?
