The Indian government has decided to refrain from rushing into cryptocurrency legislation due to concerns about the country's financial system.
Reasons for Regulatory Delays
The Reserve Bank of India (RBI) has warned that cryptocurrency regulations are difficult to enforce and that mainstream adoption of digital assets could pose threats to financial stability. The RBI document emphasizes that full recognition of cryptocurrencies could lead to increased risks. At the same time, the government acknowledges that a complete ban would not solve the problem, as peer-to-peer transfers and trading on decentralized exchanges will continue.
Current Cryptocurrency Situation in India
Cryptocurrency exchanges can still operate in India, but they must register with a local agency to prevent money laundering. Additionally, profits from cryptocurrencies are heavily taxed, which discourages speculative trading. Nevertheless, Indians have spent approximately $4.5 billion on cryptocurrencies, which is significant but not enough to threaten the country’s financial stability.
The Role of Stablecoins
The U.S. recently passed the GENIUS Act regulating dollar-backed stablecoins. India is closely monitoring the usage of stablecoins, fearing that widespread adoption could harm its payment systems, including the popular Unified Payments Interface (UPI).
India's decision to postpone cryptocurrency regulations reflects the complexity of the matter. The government is waiting and watching global developments, especially in the United States, to protect its financial system from risks.
