India Halts Crypto Regulation Over Systemic Risk Concerns

Indian authorities have shelved plans for new cryptocurrency legislation, citing fears that formal recognition could amplify systemic risks. A confidential government document obtained by Reuters reveals officials believe regulation would legitimize digital assets, potentially allowing unchecked growth that threatens financial stability.

Reserve Bank of India Governor Shaktikanta Das maintains that controlling crypto through legislation presents insurmountable challenges. The internal assessment warns that mainstream adoption could rapidly expand the sector's influence beyond manageable thresholds—"It may cause the sector to become systemic," the document states.

This regulatory paralysis follows years of indecision. After a failed 2021 attempt to ban private cryptocurrencies, India's G20 leadership pushed for global coordination in 2023. The government has now deferred its promised policy paper, opting instead to monitor U.S. regulatory developments before taking action.

Foreign exchanges continue operating under existing registration requirements, creating a paradoxical environment where crypto persists in regulatory limbo. The standoff reflects a global tension between innovation containment and financial sovereignty.