Crypto Regulations in India - Current Landscape and Future Outlook

Understanding Crypto Regulations in India Today

Cryptocurrencies are still a relatively young market, and the regulations surrounding them have been revisited repeatedly as the space continues to mature. Most recently, India has begun reassessing its stance on cryptocurrencies in response to shifting global attitudes toward virtual assets. This has especially come into focus after Trump’s return to the White House, prompting many analysts to predict a major policy shift with Crypto Regulations in India as well.

This reevaluation comes at a time when India is leading global crypto adoption for the second consecutive year, according to a report by blockchain analytics firm Chainalysis. Investors in the country have continued to engage with digital assets despite a challenging regulatory environment and steep trading taxes, especially within the Central & Southern Asia and Oceania (CSAO) region.

India’s Crypto Scene: Legal, But Unsettled

It’s completely legal to buy, sell, and hold cryptocurrency in India. The government classifies it as a Virtual Digital Asset (VDA) under the Income Tax Act. That means crypto is treated as an asset in India, much like stocks or gold, but it isn’t recognized as legal tender. So, while you can invest in Bitcoin or Ethereum, you can’t use them to pay for your groceries or book a cab just yet.

This regulatory gray area came into focus again during the ASSOCHAM 16th Capital Market Conference in New Delhi on May 22. There, SEBI Chairperson Tuhin Kanta Pandey responded to growing speculation that India might follow the U.S., where the Securities and Exchange Commission (SEC) recently approved spot Bitcoin ETFs; a big milestone in mainstream crypto adoption.

But Pandey was clear: the decision doesn't rest with SEBI. “A policy call has to be taken by the government. Crypto, as such, is not a security at the moment under SEBI regulations”, he said.

Meanwhile, the Reserve Bank of India (RBI) remains cautious. It has consistently flagged private cryptocurrencies as a potential threat to financial stability. Instead, the RBI is focusing its energy on developing a Central Bank Digital Currency (CBDC), which is already being tested in both retail and wholesale pilots.

This regulatory uncertainty has left both investors and crypto platforms operating in a kind of limbo. Many in the industry are calling on the government to lay down a clear, balanced framework; one that encourages innovation but also safeguards financial integrity and investor interests.

With countries around the world rapidly updating their crypto rules, the pressure is building on Indian policymakers to define a long-term vision. But for now, SEBI has made one thing clear: the future of crypto in India will be decided in the halls of government, not at the regulator’s office.

Where Do Things Stand? Key Rules Around Crypto in India

As digital assets become more mainstream in India, the government has introduced a clearer, though strict, framework for how cryptocurrency is taxed and monitored. Here’s a summary of these major rules that you should take a look into:

How Is Crypto Taxed in India?

India treats income from crypto as capital gains, and the rules apply uniformly, regardless of your profession or income bracket.

• Flat 30% Tax Rate: All gains from crypto are taxed at a flat 30% rate. This means you could be a salaried employee, freelancer, or business owner; your primary income source doesn’t matter. If you made profits from crypto, you’ll be taxed.

• 1% TDS on Transactions: If your crypto trades cross ₹50,000 in a financial year, a 1% Tax Deducted at Source (TDS) is automatically applied on each trade.

• No Set-off for Losses: If you lose money on trade, India’s tax regime doesn’t allow you to deduct crypto losses from your profits. Gains are taxed in full, no matter how your portfolio performs overall.

Are Crypto Exchanges Regulated?

Yes, but the regulation isn’t complete yet. Since March 2023, exchanges and other Virtual Digital Asset (VDA) service providers must comply with India's anti-money laundering laws under the Prevention of Money Laundering Act (PMLA). That means:

• Mandatory Registration with FIU-IND: All platforms handling crypto must register with the Financial Intelligence Unit – India (FIU-IND).

• KYC is a Must: Customer Due Diligence (CDD) is required. This includes full Know Your Customer (KYC) and electronic KYC (eKYC) processes.

• Monitoring Suspicious Activity: Platforms must report any suspicious transactions to FIU-IND under Suspicious Transaction Reporting (STR) obligations.

• Record Retention: All customer and transaction data must be stored for at least five years.

• Global AML Standards: Crypto platforms are expected to follow international Anti-Money Laundering (AML) practices, including audits and compliance inspections.

Together, these rules signal India’s effort to bring more structure, and oversight, to the crypto ecosystem. While the taxation is steep and the compliance requirements are heavy, the message is clear: crypto may not be banned, but it won’t operate in a legal vacuum either.

Bottom Line

Regulations around crypto are rarely ever an easy arena to explore. It took years, and a crypto-friendly government, for the U.S. to put formal rules in place. From that perspective, India isn’t far behind. The country has been steadily pushing the conversation forward, even if progress has been cautious and uneven.

What’s remarkable is that despite high taxes and strict regulations, India continues to lead in global crypto adoption, for the second year in a row. That speaks volumes about the growing interest and resilience of Indian investors in the digital asset space, many of whom are actively searching for best crypto exchanges in India to align with their trading goals.

But for now, all eyes are on New Delhi. The future of crypto in India depends on whether the government chooses to clarify, adapt, or tighten the current framework. Until then, the industry, and its investors, will have to navigate uncertainty, one policy move at a time.