India Crypto Flows: $979B Q1 Volume, Down 11% YoY, as RBI Holds Ban Line vs ICAI
TRM Labs data shows Indian retail crypto volume contracting for two straight quarters as RBI and ICAI clash over regulation before Parliament's finance panel.
Indian retail crypto trading volume printed $979 billion in Q1 2026, down 11% year-over-year from Q1 2025, according to TRM Labs — the second consecutive quarter of contraction. That liquidity data is the backdrop against which the Reserve Bank of India restated its opposition to legalizing crypto trading before the Parliamentary Standing Committee on Finance.
RBI’s stability case: unmonitorable, offshore, cross-border
The RBI’s submission to the committee frames virtual digital assets as structurally outside traditional banking rails, which the bank argues makes the asset class difficult to regulate or track and therefore a stability risk. A key data point in the RBI’s argument: a large share of exchanges and service providers serving Indian users are domiciled overseas, placing them outside direct regulatory reach.
That jurisdictional gap, per the central bank, leaves crypto rails exposed to misuse across money laundering, drug trafficking and terrorism-financing channels. The RBI cited comparative regimes to reinforce its position — the EU permits crypto activity only under tightly bounded frameworks, while China and Qatar have moved to outright prohibition.
ICAI diverges: framework over ban
The Institute of Chartered Accountants of India took the opposite position in the same committee proceedings, pushing for a comprehensive legal framework instead of prohibition. ICAI positioned itself to develop accounting standards, financial-reporting rules and compliance guidance to improve transparency around VDA activity.
ICAI’s stated position: “ICAI can undertake comprehensive research on the various forms of VDAs and analyse their economic characteristics. Based on such research, ICAI may develop detailed guidance on their recognition, measurement, presentation, and disclosure in financial statements.”
This split plays out against India’s current tax-without-recognition structure — crypto transactions are taxed, but the asset class holds no formal legal status. Union Budget 2026 tightened that regime further, introducing stricter compliance rules with fines for entities that fail to report crypto-asset transactions to tax authorities.
Security backdrop: breach count up, loss severity down
The policy standoff coincides with a security-incident data point from TRM Labs: 207 breaches tracked across the crypto industry in H1 2026, the highest count in any six-month period the firm has recorded. Total losses from those incidents fell to $972 million, less than half the $2.3 billion stolen in the same period of 2025.
Ari Redbord, Global Head of Policy at TRM Labs, framed the divergence: “The underlying threat has not diminished. In fact, it has gotten more sophisticated and more dangerous.” Rising incident count against falling aggregate loss implies attackers are spreading across more, smaller targets while defenses on larger custodial pools hold up better.
For desks tracking India exposure, the read is a regulatory impasse with no near-term resolution — RBI’s stability posture against ICAI’s push for structured recognition, layered onto declining onshore retail volume and a tightening tax-compliance regime. Whether India shifts toward licensed frameworks or holds its current tax-without-recognition stance remains the open variable for onshore liquidity.
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