India is currently reassessing its position on cryptocurrencies in response to changing global attitudes. Ajay Seth, the Economic Affairs Secretary, stated that the review takes into account the changing stances of various jurisdictions regarding the usage and acceptance of cryptocurrencies. As a result, the release of a cryptocurrency discussion paper, originally planned for September 2024, has been delayed.
Seth said, “More than one or two jurisdictions have changed their stance towards cryptocurrency in terms of the usage, their acceptance, where do they see the importance of crypto assets. In that stride, we are having a look at the discussion paper once again.”
This review comes after President Donald Trump issued an executive order that calls for the Treasury and other federal agencies to review US regulations related to the digital asset sector. The order does not explicitly mention Bitcoin or any specific cryptocurrencies, but it instructs the working group to evaluate the potential creation and maintenance of a national digital asset stockpile.
Despite India’s strict regulatory environment, which includes a 30% capital gains tax and 1% TDS on transactions, cryptocurrency investment has significantly increased among Indian investors. The country maintains strict oversight, with the Financial Intelligence Unit taking action against non-compliant exchanges. In December 2023, the FIU issued notices to nine offshore cryptocurrency platforms, and in June 2024, Binance paid a $2.25 million fine to resume operations in India.
The Reserve Bank of India has consistently expressed concerns about private digital currencies, reiterating its cautious stance in its December 2024 Financial Stability Report. However, India’s market regulator has suggested a multi-regulator approach to cryptocurrency oversight, indicating a potential openness to private virtual assets among certain authorities.
The current tax structure remains a barrier for crypto traders, as there are no provisions for offsetting losses and mandatory deductions on transactions exceeding ₹50,000 per financial year. The regulatory framework involves multiple bodies, including the Reserve Bank of India (RBI), Ministry of Finance, and SEBI.
While India still prohibits cryptocurrencies as legal tender, the ongoing policy review suggests potential adjustments to the regulatory framework.
India has had a complicated history with cryptocurrencies. From 2013 to 2017, the Reserve Bank of India issued warnings about the risks of cryptocurrencies, but there were no formal regulations in place. In 2017, as the popularity of digital assets grew, the RBI’s concerns about money laundering and investor protection led to increased scrutiny. The following year, the RBI imposed a banking ban on crypto exchanges, which cut off their access to the banking system and severely impacted India’s crypto market. However, in 2020, the Supreme Court ruled that the RBI’s ban was unconstitutional, breathing new life into the industry.
Nevertheless, the Indian government has maintained a cautious stance. While it continues to explore blockchain technology and the introduction of a central bank digital currency (CBDC), the fate of private cryptocurrencies remains uncertain. As discussions around regulation intensify, Indian crypto businesses face challenges in terms of banking access, legal clarity, and investor protection.
Despite these challenges, India remains one of the largest crypto markets in the world. With its tech-savvy population and growing interest in decentralized finance (DeFi), the outcome of India’s crypto journey will likely have a significant impact on the global regulatory approach in the years to come.