Banking Central | Why investors must not ignore RBI’s warnings on crypto

India still doesn't have a crypto regulation

A retired Kanpur-based banker, Anil Singh Chauhan, lost Rs 2.52 crore — his life’s savings, loans and even family jewellery — in just over a month, falling prey to an elaborate crypto fraud, dressed up as cryptocurrency trading, reports have said.

A stranger’s text turned into chats, then video calls and soon, the lure of quick riches. Chauhan trusted an app but what he got in return was financial ruin.

In a country without a crypto regulatory framework, investors like Chauhan do not have many regulatory options. And Chauhan’s is not an isolated tale of investor gullibility. It is the predictable outcome of India’s tolerance of a financial menace that should have checked long ago.

The absence of regulation hasn’t deterred investors. Crypto continues  to thrive and it is not confined to big cities. Tier2 and 3 and even smaller towns have been taken in and if reports are anything to go by, millions are being traded in bitcoin, ethereum, solana  and other such tokens.

Crypto is sold as the future of money but in reality, it is a speculative casino where the dice is always loaded against the small saver. Price swings make the stock market look tame; its scams are not exceptions but the very ecosystem.

Red flags are up and fluttering

In fact, the Reserve Bank of India (RBI) has been warning for years. It has flagged its role in laundering, terror finance and tax evasion, and reminded us that no central bank can safeguard a system it doesn’t control.

Governor Sanjay Malhotra has been blunt: crypto is not money, not an asset, not anything that deserves legitimacy.

An estimated over two crore Indians, many of them financially unsophisticated, are exposed.

The government’s 30 percent tax and one percent TDS in 2022 gave crypto a veneer of official sanction without offering an inch of investor protection. No licensing of exchanges. No meaningful KYC. No recourse for victims beyond an FIR that goes nowhere. Compare this with SEBI’s tight grip on equities. In crypto, there is no watchdog — only wolves.

Globally, regulators have moved. The EU’s framework forces disclosure, reserves, and anti-money laundering compliance. Even the US, often fractured on regulation, has gone after crypto intermediaries with lawsuits and penalties.

India sits in a twilight zone — neither banning nor regulating, leaving citizens like Chauhan to bleed.

What is the solution? India must either ban crypto outright or cage it with the harshest regulations.

In a country still building basic financial literacy, crypto is nothing but organised gambling with a blockchain wrapper. Every day of inaction means another saver wiped out, another household ruined.

(Banking Central is a weekly column that keeps a close watch on and connects the dots regarding the sector's most important events for readers)