RBI Calls Cryptocurrency a Threat to India: What You Need to Know?

If you have been waiting for India’s central bank to soften its stance on cryptocurrency, July 2, 2026, was not that day.

The Reserve Bank of India appeared before the Parliamentary Standing Committee on Finance, chaired by BJP MP Bhartruhari Mahtab, during the committee’s eighth sitting on the subject of virtual digital assets. The meeting was convened to examine “A Study on Virtual Digital Assets and Way Forward.” And the RBI’s position coming out of that room was the same one it has maintained since December 2013, just stated this time before a formal parliamentary body with the full weight of that forum behind it.

Committee chairman Mahtab walked out and confirmed it to reporters directly. When asked whether the RBI had suggested giving cryptocurrency legal status in India, his response was a flat no. Not a qualified no. Not a wait-and-see. Just no.

Why Does the RBI Feel This Strongly About Cryptocurrency?

The RBI’s concerns are not new, but the way they were laid out before the parliamentary panel gives a clearer picture of exactly what worries India’s central bank about virtual digital assets.

The first concern is financial stability. The RBI argued that VDAs pose systemic risks to a country like India, which is still building the depth and resilience of its formal financial system. Currencies and financial instruments that operate outside regulatory control, move across borders without oversight, and can swing 30 to 40% in value within days do not fit neatly into a framework designed around measured, predictable monetary transmission.

The second concern is more serious. The central bank told the committee that digital assets can be, and are, being used for illegal activities, specifically naming terror funding and narcotics smuggling. This is not a hypothetical risk being raised for the first time. The Enforcement Directorate had already uncovered unauthorised cross-border crypto transactions worth over Rs 2,500 crore. The Central Board of Direct Taxes found Rs 888.82 crore in undisclosed income linked to VDA transactions and had issued notices to over 44,000 taxpayers as a result. The numbers behind the risk are real and documented.

The RBI also pointed to how the rest of the world is handling this. China and Qatar have banned virtual digital assets outright. European jurisdictions have allowed them, but only under what the RBI specifically described as a very stringent, regulated framework. The implicit point being made is that even countries with deeper and more developed financial systems have either banned crypto or wrapped it in heavy regulation. The case for a lighter-touch approach in India is not strong.

The Offshore Migration Problem Nobody Is Talking About Enough

Here is the data point that makes the policy debate more complicated than it might appear.

An estimated 72.7% of India’s cryptocurrency trading volume has already migrated to offshore platforms. MP Raghav Chadha flagged during the Union Budget debates for FY 2026-27 that nearly 73% of VDA trading now happens on foreign exchanges, over 180 Indian crypto startups have moved their operations abroad, and approximately 12 crore Indian investors are using offshore platforms to trade.

That is not a small or marginal number. Twelve crore people. Using platforms that sit outside Indian regulatory reach, pay no Indian taxes on transactions, and operate in jurisdictions with very different disclosure norms.

This creates a policy dilemma that the parliamentary panel is clearly wrestling with. The RBI’s position is not to legalize VDAs. But the practical reality is that a significant portion of the activity is already happening offshore, outside any Indian regulatory framework, which means the current approach is neither preventing participation nor capturing the tax and oversight benefits that regulated domestic activity would generate.

The ICAI, which also appeared before the committee, acknowledged this tension. It backed the introduction of a comprehensive legal framework for VDAs, arguing it could support a principle-based approach and improve financial reporting and compliance clarity for stakeholders. This is a meaningful divergence from the RBI’s position, and the committee is clearly hearing both sides.

What About India’s Own Digital Currency?

The irony sitting beneath this entire debate is worth noting.

While the RBI opposes private cryptocurrency and virtual digital assets, it has been rolling out its own version of a digital currency, the e-Rupee, also known as the Central Bank Digital Currency or CBDC. The digital rupee is the RBI’s answer to the demand for digital financial instruments, except under complete central bank control rather than operating on decentralised, permissionless networks.

The problem is that the digital rupee has not exactly taken off. Adoption remains low. It has struggled to compete with UPI, which already gives Indians fast, convenient, near-instant digital payments. Committee chairman Mahtab himself pointed out that the RBI’s own digital asset is not flourishing, which creates an uncomfortable contrast. The RBI is opposing private digital assets partly on the grounds that they threaten monetary stability, while its own alternative has barely dented consumer behaviour.

This does not necessarily invalidate the RBI’s concerns about cryptocurrency. But it does add a layer of complexity to the policy picture that the parliamentary committee will need to think through as it frames its eventual recommendations.

Where Does the Policy Process Actually Stands Right Now?

The committee’s July 2 sitting was the eighth on this subject. It was a consultation, not a verdict. No regulatory decision has been made. No law has been passed.

The committee is still in its study phase, examining three broad global approaches: countries that regulate crypto like the US, UK, and EU, countries that ban it like China and Qatar, and existing frameworks that apply some VDA-related provisions without a comprehensive law. India’s income tax treatment of VDAs, with a 30% flat tax on gains and 1% TDS on transactions above certain thresholds, already exists, but the question of legal status and broader regulation remains unresolved.

What the July 2 sitting confirmed is that India’s two most authoritative financial institutions are not aligned. The RBI wants no legalisation. The ICAI wants a comprehensive framework. The parliamentary committee is hearing both and will eventually make recommendations to parliament. After which, the government will decide.

This process is not fast. It is not going to produce a clear answer next month or even next quarter. And that uncertainty itself is something investors need to factor into any decision they are making around virtual digital assets.

What Does This Mean If You Are an Investor?

Start with what is settled and work outward.

VDA gains in India are taxed at 30% with no deductions allowed, plus 1% TDS on qualifying transactions. This is the current legal position, and it has not changed. Holding crypto is not illegal. Trading it is not illegal. But it is taxed heavily, and losses from one VDA cannot be offset against gains from another.

What the July 2 parliamentary panel sitting adds to this picture is clarity about where the RBI stands, and by extension, what the regulatory trajectory looks like from the central bank’s perspective. Not positive. Not softening. Actively opposed.

For investors who have been waiting for a regulatory breakthrough that would bring Indian crypto exchanges back onshore, reduce tax burdens, or give virtual digital assets formal legal recognition, the RBI’s position is not encouraging. The ICAI’s backing for a comprehensive framework suggests a middle path is possible, but the RBI’s influence on financial regulation in India is considerable, and its opposition is not a minor obstacle.

The offshore migration data raises its own set of risks. Indian investors using foreign platforms for VDA trading are operating outside Indian consumer protection frameworks, without the recourse that regulated domestic platforms might eventually offer, and in a tax grey zone that the ED and CBDT are clearly watching. The Rs 2,500 crore in uncovered unauthorised transactions and 44,000 tax notices are signals that enforcement is active, not dormant.

For HNIs with meaningful exposure to virtual digital assets through offshore platforms or direct holdings, this is a moment to take stock carefully. Not because a ban is imminent, the committee process suggests any definitive policy outcome is still some distance away, but because the regulatory uncertainty itself carries real risk that needs to be weighed honestly against whatever returns the asset class has delivered.

Summing Up

India’s cryptocurrency policy debate is genuinely unresolved. The parliamentary committee is doing exactly what parliamentary committees are supposed to do: hearing multiple perspectives and working toward a considered recommendation. That process could produce a comprehensive regulatory framework, a stricter ban, or something in between.

What is not ambiguous is where the Reserve Bank of India stands. It has held the same position for over a decade. It restated it before a formal parliamentary body on July 2, 2026. And the governor walked out of that room without any indication that this position is softening.

For investors and HNIs building portfolios for the long term, the honest takeaway from this development is that virtual digital assets remain in a regulatory grey zone in India, with the country’s most powerful financial institution actively working against their legalisation. That is a risk factor worth building into any portfolio decision around this asset class, not dismissing.

At Bonanza Wealth Cryptocurrency, we help investors think through exactly these kinds of evolving risk landscapes. Whether you are trying to understand how VDA regulation might affect your existing holdings or you want to build a portfolio that can navigate regulatory uncertainty without unnecessary exposure, our team brings the depth and experience to help you make that call clearly.

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