The RBI crypto regulation landscape in India just witnessed its most significant development in years—and it’s not what you’d expect. While headlines focus on the Reserve Bank of India’s cautionary warnings about cryptocurrencies, three words buried in recent policy discussions have sent Indian Web3 founders into celebratory mode: “present its case.”
These seemingly innocuous words from India’s Ministry of Finance signal something extraordinary: for the first time, the government appears ready to chart its own course on crypto—one that diverges sharply from the RBI’s historically hardline stance.
The Plot Twist Nobody Saw Coming: Government vs. RBI on Crypto
In a development that’s reshaping conversations around RBI crypto regulation, India’s Ministry of Finance plans to “present its case” for stablecoin regulations in the upcoming Economic Survey 2025-2026. This policy document, which outlines key economic recommendations for the nation, could legitimize digital assets in the world’s most populous country.
Here’s why this matters: over 20 million Indians currently hold crypto, with $10 billion in stablecoin inflows recorded in just the first half of 2025—mostly USD-based stablecoins like USDT and USDC. Yet until now, India’s approach has been characterized by regulatory ambiguity, punitive 30% taxation on crypto gains, and repeated warnings from the RBI about financial stability risks.
The Economic Survey 2025-2026 represents the government’s first formal acknowledgment that stablecoins might have legitimate utility in India’s financial ecosystem—particularly for cross-border payments and remittances.
What RBI Governor Actually Said: Reading Between the Lines
RBI Governor Sanjay Malhotra’s recent comments at the Delhi School of Economics provide crucial context for understanding the shifting dynamics of RBI crypto regulation in India.
“We have a very cautious approach towards crypto because of various concerns that we have. Of course, the government has to take a final view,” Malhotra stated. “There is a working group which was set up earlier, and they will make a final call as to how, if at all, crypto is to be handled in our country.”
Let’s decode what Web3 founders are celebrating:
“Government has to take a final view” – This is the RBI explicitly acknowledging that final crypto policy decisions rest with the elected government, not the central bank. That’s significant because India’s Finance Ministry has historically been more innovation-friendly than the RBI.
“Working group… will make a final call” – There’s an active government working group reviewing crypto policy frameworks. This isn’t theoretical anymore—decisions are being actively deliberated at the highest levels.
“How, if at all, crypto is to be handled” – The phrasing “if at all” leaves room for regulation rather than outright prohibition. For an ecosystem that’s operated under existential uncertainty, even this conditional language represents progress.
The Real Game-Changer: Economic Survey 2025-2026
According to sources cited by MoneyControl, the Ministry of Finance will “present its case” for stablecoins in the Economic Survey 2025-2026. This annual policy document, traditionally used to outline the government’s economic priorities, has never previously addressed cryptocurrencies or stablecoins with this level of seriousness.
The inclusion signals that policymakers recognize stablecoins’ potential utility for:
Cross-border remittances: India receives over $125 billion in annual remittances—more than any country globally. Stablecoins could dramatically reduce transaction costs and settlement times.
Financial inclusion: In a country where millions remain unbanked or underbanked, blockchain-based stablecoins offer alternative pathways to digital financial services.
Rupee sovereignty: By developing rupee-backed stablecoins like the Asset Reserve Certificate (ARC), India aims to counter the dominance of dollar-denominated tokens and retain domestic liquidity.
The ARC Stablecoin: India’s Sovereign Crypto Play
Perhaps the most tangible signal of shifting RBI crypto regulation attitudes is the Asset Reserve Certificate (ARC)—a rupee-pegged stablecoin backed by Indian government securities, developed by Polygon Labs and Anq Labs, with a planned Q1 2026 launch.
The ARC project demonstrates several strategic priorities:
Monetary sovereignty: By creating a government-backed rupee stablecoin, India aims to provide an alternative to dollar-denominated tokens, preventing capital flight and maintaining local currency relevance in digital transactions.
Regulatory control: Unlike private stablecoins, ARC operates under government oversight, addressing RBI concerns about systemic risks, transparency, and money laundering.
Innovation within boundaries: The project shows India can embrace blockchain innovation while maintaining regulatory control—a middle path between China’s outright crypto ban and the US’s more permissive approach.
If ARC succeeds, analysts project it could retain billions in domestic liquidity that currently flows to USDT and USDC, while making Indian government debt more attractive to digital-native investors.
The RBI’s Counter-Narrative: CBDCs Over Private Crypto
To be clear, RBI Governor Malhotra hasn’t softened on private cryptocurrencies. His Delhi School of Economics remarks emphasized significant concerns about RBI crypto regulation challenges, including:
Monetary policy disruption: Widespread stablecoin adoption could undermine the RBI’s ability to manage inflation and interest rates by creating parallel monetary systems.
Financial stability risks: Private stablecoins lack the sovereign backing and regulatory oversight that central bank money provides, potentially triggering runs during market stress.
Dollar dominance concerns: Most stablecoins are dollar-denominated, which could accelerate dollarization and weaken the rupee’s standing in domestic and international transactions.
RBI Deputy Governor T. Rabi Sankar added that “unbacked cryptocurrencies have no real value, and even stablecoins backed by assets can still reduce a country’s monetary power” and could lead to policy problems that are “best avoided.”
The RBI’s preferred solution? Central Bank Digital Currency (CBDC)—specifically, the Digital Rupee, which has grown to over 5 million users with ₹1,000 crore in transactions within three years of pilot programs.
“Central bank digital currencies can achieve the benefits that stablecoins claim to offer—efficiency, programmability, and instant settlement—but with the credibility and safety of central bank money,” the RBI stated in its financial stability report.
EXPERT TAKE:
“This divergence between the Ministry of Finance and the RBI represents a healthy democratic tension,” explains a senior blockchain policy advisor who requested anonymity. “The RBI’s institutional mandate is financial stability and monetary sovereignty—of course they’re conservative on crypto. But the Finance Ministry’s mandate includes innovation, competitiveness, and economic growth. They see 20 million Indians holding crypto despite regulatory uncertainty and recognize that prohibition isn’t working.”
The advisor adds: “The phrase ‘present its case’ in the context of the Economic Survey is significant. It means the Finance Ministry has developed an evidence-based policy argument for regulated stablecoin frameworks. They’re not just entertaining the idea—they’re actively advocating for it internally. That’s unprecedented in Indian crypto policy.”
What This Means for India’s Crypto Ecosystem
If India formalizes stablecoin regulations in 2026, the implications cascade across multiple dimensions:
Legitimacy for crypto businesses: Regulatory clarity could attract major blockchain firms, venture capital, and talent that have avoided India due to policy uncertainty.
Tax rationalization pressure: Once the government acknowledges crypto’s legitimacy through regulation, the current 30% tax rate (among the world’s highest) becomes harder to justify and may face revision.
Banking access restoration: With proper regulatory frameworks, crypto businesses could regain access to banking services, ending the quasi-ban that’s persisted despite the Supreme Court overturning the RBI’s 2018 banking prohibition.
Innovation ecosystem growth: Clear RBI crypto regulation guidelines would enable Indian developers to build DeFi protocols, NFT platforms, and blockchain infrastructure without constant regulatory ambiguity.
The Global Context: India Caught Between Superpowers
India’s cautious navigation of RBI crypto regulation reflects its position between two opposing global models:
The US Model: Stablecoin-friendly, CBDC-hostile. President Trump signed an executive order banning CBDCs in January 2025, while the GENIUS Act established regulatory frameworks for stablecoins.
The China Model: Stablecoin-hostile, CBDC-champion. China banned cryptocurrency transactions in 2021 while aggressively promoting its digital yuan, which has processed over $2.38 trillion in transactions.
India appears to be charting a third path—regulated private stablecoins (like ARC) operating alongside a government CBDC (Digital Rupee), with appropriate oversight mechanisms for both.
This balanced approach could position India as a global leader in responsible crypto regulation—proving that innovation and stability aren’t mutually exclusive.
The Bottom Line: Is the Ban Really Lifting?
Let’s be precise: India never had a formal “crypto ban” despite popular perception. The 2018 RBI banking ban was overturned by the Supreme Court in 2020. Cryptocurrencies are legally defined as Virtual Digital Assets under tax law. Exchanges operate legally after registering with the Financial Intelligence Unit.
What India has lacked is regulatory clarity and government endorsement. The Economic Survey 2025-2026 could provide both—at least for stablecoins.
RBI Governor Malhotra’s acknowledgment that “the government has to take a final view” is itself a softening from the RBI’s previous posture of simply warning against crypto without recognizing governmental authority to decide otherwise.
For Web3 founders, those three words—”present its case”—represent something they’ve waited years for: the government actively arguing for crypto regulation rather than against it.
The crypto winter in India may not be over yet, but for the first time in years, there’s a credible thaw underway. And in a regulatory environment that’s been frozen since 2018, even a thaw feels like spring.
SUMMARY POINTS:
- Policy Divergence Emerges: India’s Ministry of Finance is preparing to include stablecoin regulatory proposals in the Economic Survey 2025-2026, marking the first formal government backing for crypto asset frameworks despite RBI’s cautious stance on crypto risks.
- Regulatory Clarity Timeline: A government-appointed working group is actively reviewing crypto policy with authority to make “final call” on regulatory approach—indicating concrete decision-making is imminent rather than indefinite delays.
- Stablecoin Innovation Push: India is developing the Asset Reserve Certificate (ARC), a rupee-pegged stablecoin backed by government securities, set for Q1 2026 launch through Polygon Labs and Anq Labs—demonstrating government support for regulated domestic alternatives to dollar-denominated stablecoins.
