The Reserve Bank of India has formally recommended that banks and financial institutions be prohibited from holding, trading, or gaining exposure to crypto assets and privately issued stablecoins.
Internal documents from May and June reveal the central bank is advocating for policies "leaning towards prohibition" to mitigate contagion risks to the broader financial system.
The central bank has long warned that virtual digital assets pose significant threats to the financial stability of emerging economies like India.
Simultaneously, India's tax department has issued warnings regarding the potential for tax evasion through cryptocurrency transactions.
The dual pressure from the country's primary financial regulator and its revenue authority signals a coordinated tightening of the regulatory environment for digital assets in the world's fourth-largest economy.
This development marks a significant escalation from the RBI's previous stance.
The central bank has long warned that virtual digital assets pose significant threats to the financial stability of emerging economies like India.