Indian Crypto Adoption and Regulatory Landscape
India is leading in grassroots crypto adoption for the second consecutive year, as reported in the 2024 'Geography of Crypto' by Chainalysis. The National Association of Software and Service Companies (NASSCOM) highlights that Indian retail investors have invested $6.6 billion in crypto assets, with potential job creation exceeding eight lakh by 2030. Despite regulatory challenges, India has one of the largest web3 developer groups.
Regulatory Challenges and Supreme Court Observations
In May 2025, the Supreme Court of India questioned the absence of clear crypto regulations, highlighting a gap between Virtual Digital Assets (VDA) reality and policy. This has posed challenges for regulators and market players trying to align with the decentralized nature of VDAs.
Reserve Bank of India's Concerns
The Reserve Bank of India (RBI) expressed concerns about crypto as early as 2013. Despite warnings, the crypto market grew, leading to a 2018 RBI circular barring financial institutions from dealing with VDA entities, which was overturned in 2020. The government then introduced taxation as a temporary measure.
Tax Policies and Offshore Trading
- In 2022, India implemented a 1% TDS on VDA transactions over ₹10,000 and a 30% capital gains tax, disallowing loss offsetting.
- Between July 2022 and December 2023, Indians traded over ₹1.03 trillion VDAs on non-compliant platforms, leading to a loss of ₹2,488 crore in tax revenue.
- Offshore trading from December 2023 to October 2024 saw volumes of ₹2.63 trillion, with uncollected TDS exceeding ₹60 billion.
Efforts and Challenges in Regulation
Efforts to block non-compliant platforms have had limited success, with users bypassing restrictions using VPNs and mirror platforms. Global bodies like the IMF and FATF advocate for risk-based regulation harmonized with international standards.
Role of Virtual Asset Service Providers (VASP)
Indian VASP platforms show promise in compliance and good faith actions. They collaborate with the Financial Intelligence Unit-India to enhance anti-money laundering controls. Post-2024 hack, Indian exchanges improved cybersecurity and established insurance funds.
Conclusion
The current policy, focused on taxation without meaningful regulation, needs a balanced and pragmatic framework. Comprehensive legislation is necessary to mitigate crypto industry risks and harness its potential for economic growth and national value creation.