India’s Take on Crypto Reforms and ETFs Approval: A Clear “NO”

India’s Decision on Crypto Reforms and Approval of ETFs Remains NO

The Finance Ministry of India has clarified that no relaxation in the crypto regulation will happen and no ETF will be approved in the near future. Although the demand and adoption are increasing worldwide, the country is not changing its 2022 tax regulations. This ruling may pose some problems to the developing digital asset sector in the country.

India’s Decision: No Changes Ahead  

The Ministry of Finance has recently stated that it has no plans to change the current tax structure. The ruling was announced both in official reports and on social media.

As per the Union Budget, Virtual Digital Assets (VDAs), like Bitcoin and Ethereum, are taxed at a flat 30% rate, with a 1% TDS (Tax Deducted at Source) on transactions exceeding ₹10,000. The government also clarified that Indian firms that have exposure to crypto assets will have to now report holdings in their financial statements. In the last 2 years, the country has collected crypto tax revenue of around Rs. 700 crore.  

However, the ministry also clarified that crypto is still unregulated in India, and no official information has been gathered on the use of cryptocurrencies over the past five years. While countries like the U.S. and Bhutan are using cryptocurrencies for economic growth and financial inclusion. That's why the country is choosing a cautious route that may slow down innovation and investor interest.

Source: X

Why is India still playing safe on crypto?

• Since 2019, Finance Minister Nirmala Sitharaman has tightened the regulations instead of quick adoption. For financial stability, control of capital flows, and the fluctuating markets.

• Authorities feel that the launch of Bitcoin ETFs will bring in risks. They may cause more exposure of retail investors in highly fluctuating markets. 

• The establishment of an adequate legal framework remains a work in progress. The ministry is not willing to get involved in legal and political intricacies.

• India is also prioritising fiscal discipline and does not want to open doors to speculative investments without full regulatory clarity.

• The government continues to follow a shortsighted approach and view digital assets as high-risk instruments rather than financial tools for inclusive growth.

Source: X

What If India Adopts Crypto-Friendly Policies? 

This could unlock massive growth for the $6.4 billion Indian cryptocurrency market. Institutional investors might enter the space, boosting transparency, safety, and economic activity.

More startups could emerge, and talent would stay in the country instead of moving abroad. Analysts also believe that cryptocurrency-friendly policies could help increase financial inclusion, especially for people with limited access to traditional banking systems.

Following the global trend could also strengthen India's position in the global fintech and Web3 ecosystem, offering long-term economic and innovation benefits.

Investor Reaction and Industry Challenges

The lack of change has upset both retail investors and industry players. Many traders feel burdened by the high 30% tax and 1% TDS, which eat into profits and reduce daily trading volumes. Without ETFs in India, institutional investors have no safe or regulated way to participate. The absence of government support may also reduce foreign interest in the Indian market.

What’s Next?

The market stands at a crossroads. With no approval of ETFs and continued high taxes, stakeholders are calling for urgent reforms. While the government remains cautious, the pressure from the community and global competition may eventually push India to rethink its current policies and legal framework.