New Delhi: Goverment is unlikely to introduce a full law to regulate cryptocurrencies. Instead, the government plans to maintain limited oversight, fearing that mainstreaming digital assets could create risks for the country’s financial system, according to an internal government paper seen by Reuters.
The paper says regulating cryptocurrencies could end up giving them legitimacy and make the sector “systemic.” But banning them completely would not stop peer-to-peer transfers or trades on decentralised exchanges. For now, India’s approach is to let global crypto exchanges operate locally only after they register with a government agency for anti–money laundering checks. Gains from crypto are taxed heavily to discourage speculation and penalise fraud.
Indians currently hold about USD 4.5 billion in cryptocurrencies, which is not seen as a major threat to financial stability. The government believes that existing taxes and rules already act as a deterrent. This limited clarity has also helped contain risks from crypto on the regulated financial system.
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The paper notes that countries around the world are taking different approaches to digital assets. The United States has passed a law to allow wider use of stablecoins — cryptocurrencies pegged to the U.S. dollar — while China continues to ban crypto but is working on a yuan-backed stablecoin. Japan and Australia are creating cautious regulatory frameworks.
Goverment says the growing use of dollar-backed stablecoins worldwide could impact national payment systems and potentially weaken India’s homegrown digital payment network, UPI. Because of this, the government says it will closely watch how stablecoins develop globally before deciding its own approach.
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