India's RBI backs crypto ban for financial institutions

India's central bank has renewed its push for a national cryptocurrency policy that favors prohibition, citing risks to financial stability and significant gaps in tax enforcement. The Reserve Bank of India's position, detailed in internal government documents from May and June 2026, advocates for barring banks and financial institutions from holding, trading, or taking any exposure to crypto assets and privately issued stablecoins.

The RBI argues this approach is necessary to keep digital assets outside the regulated financial system and limit contagion risks. The central bank has also extended its warnings to stablecoins, stating that foreign currency-backed tokens threaten domestic monetary sovereignty, while rupee-pegged stablecoins could reduce government seigniorage revenue and create financial stability risks during market stress.

These recommendations come as India's tax authorities report severe difficulties in tracking and taxing cryptocurrency transactions. Documents show that in the financial year ending March 2023, fewer than a quarter of the 645,000 individuals who conducted crypto transactions reported those activities on their income tax returns. Officials said...