Cryptocurrency is a virtual digital asset (VDA) which uses blockchain technology for creation, setting it’s value and transfer of the digital assets. With this currency being in virtual environment only, the reluctance of world governments and users to accept it as a legal tender is justified. In India, cryptocurrencies are not banned but they are also not yet recognized as a legal tender. Trading and investing in digital currency like Bitcoin and Ethereum are permitted, however, they operate within a regulatory grey area without any guidelines or policy in place.
A Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was proposed in order to ban private cryptocurrencies but was not passed, leaving the legislation incomplete. A new revised bill is expected to come in it’s place making cryptocurrency a digital asset but not a legal tender. However, the timeline for the new bill is not yet indicated by the government.
Despite regulatory uncertainties, cryptocurrency is being adopted in India and is on the rise, particularly among younger populations in smaller cities. The Indian crypto market is projected to grow from $2.5 billion in 2024 to over $15 billion by 2035, reflecting a compound annual growth rate of 18.5%
The Reserve Bank of India (RBI) has always expressed concerns over cryptocurrencies and urged Indian users and businesses to take a caution while dealing in cryptocurrencies. RBI has stated risks and imbalance in macroeconomic stability affecting income levels creating disparity, unemployment rates, GDP, interest rates, government debt, trade, foreign inward remittances and more. It states that use of cryptocurrency as legal tender can be used for unmonitored illegal activities like fraud or terror financing. Cryptocurrencies are stateless digital currencies which are not regulated via a central bank and hence government would have no control over its unwanted usage.
Indian government is however reassessing and framing its cryptocurrency policies in light of global regulatory developments. There have been policy shifts across the western world in adoption of cryptocurrency. For example, in the United States under trump regime is pro-virtual digital assets. In January of 2025, an order was released to promote United State’s leadership in digital assets and financial technology. Another order in March of 2025 directed to establish a ‘Strategic bitcoin reserve’. Considering the cross-border nature of digital assets and global policies, Indian government is considering international best practices to formulate its own regulatory framework.
One contrast that is seen in strategy between India and the US is that India is actively developing its own Central Bank Digital Currency (CBDC), known as the Digital Rupee (e₹). The RBI has conducted pilot programs for both retail and wholesale use cases, aiming to enhance the digital economy, reduce the cost of cash management, and increase financial inclusion. United States is not seeking to establish any CBDC.
Securities and Exchange Board of India (SEBI) and the Ministry of Finance have advocated for a multi-agency regulatory approach, indicating a shift towards more structured oversight and regulations. However, by when this regulatory framework or policy would be in place is yet to be known.
Virtual asset service providers (VASPs) are required to register with the Financial Intelligence Unit (FIU) and adhere to anti-money laundering (AML) and know-your-customer (KYC) norms. Major international and Indian exchanges like Coinbase and CoinDCX have registered with the Financial Intelligence Unit, signalling a shift towards acceptability of a favourable regulatory environment.
For those trading in crypto, India imposes a 30% tax on profits from cryptocurrency transactions, along with a 1% Tax Deducted at Source (TDS) on all crypto trades. The 2025 Union Budget introduced stricter compliance measures, including a 70% penalty on undisclosed crypto gains, applicable to profits from the past four years. Additionally, starting FY 2025-26, mandatory reporting of crypto transactions have been implemented to enhance transparency.
India does not currently have comprehensive legislation governing cryptocurrencies and it’s position on the same is evolving, the combination of taxation policies, regulatory oversight, and the development of a CBDC indicates a move towards a more defined and structured approach to digital assets.
