RBI Backs Crypto Ban as Tax Department Warns of Evasion Risks, Documents Reveal

India's Reserve Bank and its tax department have both come out against cryptocurrencies in internal documents, with the RBI backing an outright ban and the tax authority flagging serious risks of tax evasion through digital assets. The documents, obtained and reported by Reuters, provide the clearest picture yet of where India's financial establishment stands on an issue that has remained unresolved for years.

The RBI has long been hostile to cryptocurrencies, and its backing of a ban in these documents is consistent with its public position. The central bank has previously argued that crypto poses risks to financial stability and monetary sovereignty. The tax department's warning about evasion risks adds a fiscal dimension to the debate — one that is likely to resonate with a government that has made broadening the tax base a priority.

India currently taxes crypto gains heavily but has not banned or fully regulated the asset class, leaving investors and exchanges in a regulatory grey zone. The government had been expected to eventually release a comprehensive crypto policy framework, but that has been repeatedly delayed. The leaked documents suggest the internal consensus leans heavily towards restriction rather than accommodation.

For India's substantial retail crypto investor base — which expanded sharply during the pandemic-era boom — the RBI's documented position is a sobering signal. If the government moves towards a ban consistent with the RBI's preference, it would mark one of the most significant financial regulatory decisions of the decade.