India may not be in a hurry to finalise a regulatory framework for cryptocurrencies… which could lead to ‘dollarization’ of the economy,” said a senior government official .
Why India is Holding Back
Government authorities are reluctant to declare cryptocurrencies as legal tender, citing global uncertainty over regulation. They prefer to observe how other countries respond rather than act unilaterally .
Almost all cryptocurrencies are dollar-denominated and issued by foreign entities, raising concerns that widespread adoption could trigger dollarization—a shift away from the rupee, threatening India’s monetary sovereignty .
Central Bank Concerns Reaffirmed
RBI briefed the Parliamentary Standing Committee in 2022, stating that crypto’s dollar-linkage could replace the rupee in domestic and cross-border transactions.
Officials warned cryptocurrencies could undermine RBI’s control over money flow, especially if used as an alternate medium of exchange .
Global Regulatory Uncertainty
With no consensus internationally on crypto regulations or legal status, India wants to avoid a piecemeal approach. A senior official noted, “Unless we know how other countries are moving forward… we can’t take unilateral measures.” .
What This Means for Crypto in India
India remains tacitly cautious—not banning cryptocurrencies, but refraining from granting them legal status.
The government is delaying a clear regulations framework, opting to observe how major economies evolve in their approach.
With the global market cap at US $3.45 trillion—up 28% in a year—anything may happen next .
Takeaway
India’s stance: Wait-and-watch on crypto—fears of dollarization and policy disruption are holding the government back.
For now: Cryptos remain neither approved nor banned, but carry significant regulatory uncertainty.
Watch this space: As other countries clarify their stance, India may reassess regulatory options.
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