India’s Crypto Landscape Faces Potential Shift in Regulatory Approach
India’s cryptocurrency sector is currently experiencing heightened activity as reports indicate that the government is reconsidering its position on digital assets. In light of the growing trend of global regulatory frameworks for cryptocurrencies, Indian policymakers seem to be re-evaluating their strategy. This reassessment arises from concerns that without definitive regulations, India risks falling behind in the rapidly advancing realms of crypto and Web3 technologies. While the recent Budget 2025 did not provide any immediate relief, the discussion paper on updated regulations, which has been in the works since September of last year, suggests that progress may be on the horizon, according to local crypto exchanges.
Vikram Subburaj, the CEO of Giottus, remarked that this renewed focus on crypto regulations indicates the government’s readiness to adapt to international developments and broader economic trends. “This also stems from the realization that India could lose out on becoming the crypto and Web3 powerhouse if we back out of bringing in strong regulations that protect investors and encourage innovation,” he stated.
Government’s Shift Mirrors Global Trends
India’s decision to review its crypto regulatory framework comes on the heels of recent policy shifts in the United States, where President Donald Trump has introduced executive orders aimed at advancing crypto adoption. This includes the establishment of a presidential working group tasked with creating a federal regulatory structure for digital assets. “It is encouraging to see the Department of Economic Affairs (DEA) recognize global regulatory advancements in crypto, particularly in areas like international remittances. However, despite discussions at the G20, India has yet to take a concrete stance, while other major economies have already moved forward with regulatory frameworks,” noted Sumit Gupta, Co-founder of CoinDCX.
Gupta highlighted that the European Union has enacted the Markets in Crypto-Assets Regulation (MiCAR), South Korea has implemented the Virtual Asset User Protection Act (VAUPA), and Hong Kong has introduced new licensing regulations, alongside China’s anti-money laundering (AML) rules for cryptocurrencies. “Brazil, Turkey, and the UK have also introduced comprehensive crypto regulations. Essentially, every major economy except India has made progress. The crypto industry is dynamic, with rapid technological advancements. This should not be an excuse for regulatory inaction,” he added.
India’s Growing Crypto Adoption
Significantly, India has emerged as a leader in global cryptocurrency adoption for the second consecutive year. Between June 2023 and July 2024, the country ranked prominently in the utilization of both centralized exchanges and decentralized finance (DeFi) services. Thus, revisiting crypto regulations has become even more critical.
Sathvik Vishwanath, Co-founder and CEO of Unocoin, expressed optimism that the government may gradually change its stance as the global crypto landscape continues to evolve. “Currently, it’s cautious, but if the industry keeps advocating for clearer rules and improved tax structures, we could see a shift. It’s all about finding a balance between fostering innovation and safeguarding investors, so they’ll likely adjust if the demand and conversation around crypto intensify,” he mentioned.
New Compliance Measures Proposed
In the meantime, the government has tightened compliance requirements related to cryptocurrency. Finance Minister Nirmala Sitharaman, in this year’s budget, proposed amendments to the Income Tax Act that would require entities, including crypto exchanges, to disclose transaction details concerning digital assets. The minister also suggested incorporating the term “virtual digital asset” (VDA) into the definition of undisclosed income for the block period.
Sonu Jain, Chief Risk and Compliance Officer at digital asset management firm 9Point Capital, explained that the proposed amendments, particularly the requirement for exchanges to report all crypto trading details to the government under section 285BAA, align with the OECD’s Common Reporting Framework (CARF) to combat global tax evasion involving digital assets. “This information will then be shared with all OECD member nations to ensure tax authorities worldwide can effectively tackle tax evasion,” Jain stated.
Concerns Over Overregulation
While Sitharaman’s proposals aim to clarify the treatment of cryptocurrencies, Thangapandi Durai, CEO of Koinpark, raised concerns about the potential overregulation stemming from treating all crypto holdings as undisclosed income without differentiating between active traders, long-term investors, and casual users. “The high tax incidence and stringent reporting requirements may accelerate capital outflows to foreign exchanges, reducing liquidity in domestic markets,” warned Durai.
Despite the challenges, India’s cryptocurrency industry remains hopeful that a clearer regulatory framework will soon emerge, one that promotes innovation while ensuring robust investor protection. Nonetheless, stakeholders continue to urge for decisive actions to keep India competitive in the swiftly changing global digital asset landscape.
