India Holds Back On Comprehensive Crypto Regulation, Fearing it Might Destabalise Financial System

India is holding back from introducing a comprehensive law to regulate cryptocurrencies, with policymakers warning that such a move could inadvertently legitimize the asset class and threaten the country’s financial stability.

According to a government document cited by Reuters, India will instead continue its current approach of partial oversight—mandating registration and anti-money laundering compliance for exchanges, but stopping short of a clear legal framework for the sector.

Despite ranking among the world’s top nations for crypto adoption, Indian authorities remain cautious. The Reserve Bank of India (RBI) has repeatedly warned that effective regulation would be difficult, and worries that formalizing crypto could pose “systemic risks” to the broader financial system.

However, heavy taxes on digital asset gains and strict compliance rules have kept trading volumes modest, with Indian citizens collectively holding roughly $4.5 billion in crypto assets. Officials argue this sum is not yet significant enough to threaten financial stability.

Current policy allows global crypto exchanges to operate locally if they register for AML checks, but does not grant digital assets the status of legal tender. Notably, there are no imminent plans to enshrine crypto regulation in law, with a previous 2021 bill proposing a ban shelved in favor of further global consultation.

The government has since watched U.S. and international regulatory developments, even as President Trump’s administration in the United States and other global markets accelerate crypto rulemaking.

For industry participants and investors, this means India remains in regulatory limbo—crypto can be owned and traded, but remains outside the formal mainstream. Calls for uniform global standards continue, but local regulators maintain that limited, risk-based oversight is preferable to full-scale legalization at present.

India’s approach highlights the ongoing global debate around integrating digital assets into traditional finance—and underscores the challenges policymakers face in keeping pace with rapidly evolving crypto markets while safeguarding financial stability.