India Crypto Regulation: Why Leaders Hesitate Despite Top Adoption

India ranks 1 in Chainalysis global crypto adoption index 2025, where millions employ digital assets utilizing both centralized and decentralized systems. Yet, the country still avoids explicit regulation, with people asking: why hold back despite ranking on top of usage?

The country is concerned that developing an exhaustive India crypto regulation framework would legalize the industry and ground it more in the economy, giving rise to systemic risks, according to a recent report .

Source: X

The Reserve Bank of India (RBI) maintains that regulating the assets is virtually impossible. Even a ban would not curb peer-to-peer transfers or decentralized platform activity, thus it has taken the middle path—part regulation with no legal basis.

Fear of Legitimacy and Old Wounds

Authorities expect to totally acknowledge virtual assets to cause quick mainstream takeup, to destabilize the financial system—particularly since most of them are viewed as speculative. The Indian crypto policy has stayed frozen since a 2021 bill was shelved, and a planned 2024 discussion paper never came out.

This caution also stems from frequent scams and breaches. The WazirX hack that stole about $230 million and the CoinDCX hack worth $44 million showed how fragile platforms can be, causing huge platform losses and damaging trust. These crypto hack news incidents have made the authorities wary of moving too fast with new regulation for cryptocurrency, lest further public losses erode trust in the financial system.

Growing Demand for Stablecoin Transparency

Whereas the government is still hesitant, there are some experts advocating for India Stablecoin regulations. The government has to act fast, according to former RBI Executive Director G. Padmanabhan, and not repeat the same confusion it did initially with digital assets.

Even inside politics, acceptance is rising— Union Minister Jayant Chaudhary and his spouse officially declared ₹43 lakh worth of digital assets.

Source: X

Meanwhile, Sumit Gupta, CEO of CoinDCX, says INR-backed stablecoins could cut payment costs, boost exports, and support the country's journey toward a $10 trillion economy. Globally, stablecoins have already crossed $150 billion, but none are rupee-backed yet.

Source: X

Supporters argue that regulated stablecoins could slash India’s $125B annual remittance fees by 90%, improve financial inclusion, and enhance digital transaction trust. With strict audits and full reserves, similar to USD Coin, they could also increase demand for short-term government securities and strengthen the rupee digitally.

Balancing the Risks Prior to a Leap

There are risks nonetheless. Weakly designed rules can drain money out of banks, repress credit expansion, and reduce market competition if the market is dominated by only a few issuers. Red-hots usage of short-term government paper by issuers can destabilize too, if redemptions surge in a matter of milliseconds—like Silicon Valley Bank in 2023. Capital flight or money laundering are also feared if cross-border transactions are not closely supervised.

Conclusion

India’s hesitation is rooted in a fear that fast-tracking Stablecoin regulations or granting legal status could harm its financial system, even though it leads in global crypto adoption. For now, the government appears set on keeping the sector small and controlled—watching how other countries move before committing. Clarity will be needed eventually, but policymakers are determined not to rush into decisions about is crypto legal in India without full confidence in safeguards.

Disclaimer: This is for educational purposes only. Always do your own research before any crypto investment.