India re-evaluates cryptocurrency regulations, inspired by the US: report
India is currently reassessing its position on cryptocurrencies in response to changing global attitudes. According to Ajay Seth, the Economic Affairs Secretary, India’s review takes into account the evolving positions of various jurisdictions on the usage and acceptance of cryptocurrencies. As a result of this reassessment, the release of a cryptocurrency discussion paper, originally scheduled for September 2024, has been delayed.
Seth stated, “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 in the wake of an executive order by President Donald Trump, which instructs the Treasury and other federal agencies to review US regulations related to the digital asset sector. The order does not explicitly mention Bitcoin or other specific cryptocurrencies, but rather tasks the working group with evaluating the potential creation and maintenance of a national digital asset stockpile.
Despite India’s strict regulatory environment, including a 30% capital gains tax and 1% TDS on transactions, cryptocurrency investment has seen significant growth among Indian investors. The country maintains tight oversight, as evidenced by 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, the market regulator in India has suggested a multi-regulator approach to overseeing cryptocurrencies, indicating a potential openness to private virtual assets among certain authorities.
The current tax structure in India remains a barrier for crypto traders, with 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.
Although India still prohibits cryptocurrencies as legal tender, the ongoing policy review suggests potential adjustments to the regulatory framework.
India has had a complex history with cryptocurrencies. From 2013 to 2017, the RBI issued warnings about the risks associated with cryptocurrencies, but there were no formal regulations in place. As the popularity of digital assets grew, the RBI’s concerns about money laundering and investor protection led to increased scrutiny in 2017.
The following year, the RBI implemented a banking ban on crypto exchanges, effectively cutting off their access to the banking system. This had a significant impact on India’s crypto market until the Supreme Court ruled in 2020, declaring the RBI’s ban unconstitutional and revitalizing the industry.
However, the Indian government has maintained a cautious stance since then. 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 on regulation intensify, Indian crypto businesses face challenges in terms of banking access, legal clarity, and investor protection.
Despite these obstacles, India remains one of the largest cryptocurrency 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 shape the global regulatory approach in the years to come.
