Our Special Correspondent
06-06-2025
The government remains cautious about legalising cryptocurrencies in India.
Amidst the debate over legalising crypto currency in India, the official stance, as articulated by the Reserve Bank of India (RBI), has remained cautious, with concerns over the stability of the financial system and the potential risks of decentralised currencies. India is cautious when it comes to the regulation and use of cryptocurrencies, a rapidly evolving sector that has sparked debate globally. While Pakistan, its immediate neighbour, is working to integrate cryptocurrencies into its economy, India still faces regulatory uncertainty.
On June 6, RBI Governor Sanjay Malhotra expressed deep concerns about the proliferation of cryptocurrencies. He warned that the growth of digital currencies could undermine financial stability, disrupt monetary policy, and even lead to potential misuse in the shadow economy. In his remarks, he noted that despite previous court rulings and discussions, no substantial changes had been made regarding cryptocurrency regulation in India. The RBI’s position is clear: it remains highly cautious about the role of cryptocurrencies in the broader financial ecosystem.
One of the key points raised by Malhotra was that cryptocurrencies could destabilise the Indian financial system, primarily due to their volatility and unregulated nature. This echoes the RBI’s previous concerns over the potential for cryptocurrencies to be used in illicit activities, including money laundering and terrorist financing. The Indian government, led by various departments, including the Ministry of Finance and the RBI, has been considering regulatory frameworks for digital currencies. However, these discussions have yet to result in any concrete steps towards mainstream adoption or regulation.
In addition, the Supreme Court's ruling in March 2025 has pushed the government to reconsider its stance, which urged the federal government to formulate a clear-cut policy. Yet, despite the court's directive, a definitive regulatory framework is still in limbo, leaving both the public and the industry uncertain about how cryptocurrencies will be treated in the future.
On the other side of the debate, crypto industry leaders and firms like CoinSwitch are lobbying for clearer regulatory guidelines that will allow India to capitalise on the growing global crypto market. A media report cited Ashish Singhal, co-founder of CoinSwitch, as having said that India is lagging behind global competitors due to the lack of a structured policy. He reportedly argued that with other countries like the US providing regulatory clarity, India risks missing out on a multi-billion-dollar market.
Meanwhile, Pakistan has been making headlines for its bold moves in the crypto space. In a surprising development, Pakistan announced plans to establish a "Strategic Bitcoin Reserve" in collaboration with the World Liberty Financial Inc. (WLFI), a firm with links to US President Donald Trump’s circle. However, the situation took a twist when Pakistan’s central bank reaffirmed that all crypto transactions are still illegal under current regulations. Despite this, Pakistan’s government has shown a willingness to engage in discussions around digital currencies, with the government aiming to create a legal framework once it gains parliamentary approval.
India’s concern about Pakistan's growing interest in cryptocurrencies is not merely one of economic competition but of national security. Reports suggest that cryptocurrencies could be used to fund illicit activities, including terrorism. India reportedly fears that the push for crypto could further empower extremist groups by providing them with an untraceable financial tool. India has already raised concerns globally, asking for more stringent monitoring of cryptocurrencies, especially in regions like South Asia.
The debate surrounding cryptocurrencies in India is a complex one, involving financial stability, security concerns, and the need for innovation. While RBI’s caution is rooted in the need to protect the Indian economy from potential instability, the crypto industry is pushing for more clarity and regulation to allow India to remain competitive in a growing global market.
