India crypto regulation: New 2026 tax rules and compliance scrutiny tighten reins on investors
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India crypto regulation: New 2026 tax rules and compliance scrutiny tighten reins on investors Photograph: (Credit: AFP)
As global markets accelerate toward institutional crypto adoption, India has dramatically tightened its domestic enforcement architecture, using Budget 2026.
India seems to be preparing to draw a hard line on crypto, even as the United States embraces digital assets under Trump 2.0. Government documents reviewed by Reuters show the Reserve Bank of India has doubled down on a policy "leaning towards prohibition". The demand: banks and financial institutions must be completely walled off from crypto. That means no holding, no trading, and absolutely no exposure. And the ban is not just foreign stablecoins either.
RBI deputy governor Rohit Jain has told parliament's finance committee that even rupee-pegged stablecoins are a threat. He warned they could erode the government's currency-issuance revenue and trigger liquidity stress in a crisis. The tax department is backing this with hard evidence. Fewer than 25 per cent of the 645,000 Indians who traded crypto in fiscal year 2023 declared it on their returns.
The Enforcement Directorate has already flagged over ₹2,500 crore in unauthorised cross-border crypto transfers and raided five payment firms in Bengaluru over an alleged $265-million scheme. From April this year, non-reporting by exchanges now draws daily penalties. Yet here's India's contradiction: Nearly 39 million investors hold roughly $2.1 billion in digital assets. That marks one of the world's largest crypto user bases. And there's still no law banning or regulating them.
Crypto has existed in legal limbo since courts struck down the RBI's 2018 banking ban, and a proposed 2021 ban bill never even reached parliament. A government discussion paper has now been shelved five times, with the RBI's opposition cited as the main reason. The backdrop matters too.
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Iran tensions have pushed oil prices and the rupee to record lows, and New Delhi fears crypto could accelerate capital flight through unregulated channels. The contrast with Washington's and Islamabad's pro-crypto pivot couldn't be starker. A parliamentary report is due this monsoon session, and that's when we'll know if India's grey zone on crypto finally ends.
