India is reassessing its approach to cryptocurrency as global attitudes shift.
Economic Affairs Secretary Ajay Seth stated that India’s reexamination considers the evolving cryptocurrency positions across various jurisdictions. This review has postponed the release of a discussion paper on cryptocurrency originally set for September 2024.
Seth noted, “Several jurisdictions have altered their stance on cryptocurrency in terms of usage and acceptance, prompting us to revisit the discussion paper.”
This review aligns with recent developments, including an executive order that instructs federal agencies to assess regulations impacting the digital asset sector. The order did not specifically mention Bitcoin or any other cryptocurrency, focusing instead on evaluating the potential for creating and maintaining a national digital asset stockpile.
India’s Strict Crypto Policy Persists
Despite a stringent regulatory environment, including a 30% capital gains tax and a 1% TDS on transactions, cryptocurrency investments are on the rise among Indian investors.
The Financial Intelligence Unit (FIU) continues to monitor compliance closely, having issued notices to nine offshore cryptocurrency platforms in December 2023. To resume operations in India, one prominent exchange paid a $2.25 million fine in June 2024.
The Reserve Bank of India has consistently raised concerns regarding private digital currencies, a stance reaffirmed in its December 2024 Financial Stability Report. However, India’s market regulator has proposed a multi-regulator approach to overseeing cryptocurrencies, signaling possible openness to the private virtual assets landscape.
The existing tax structure presents challenges for crypto traders, with no current provisions for offsetting losses and mandatory deductions applicable to transactions exceeding ₹50,000 per financial year. Oversight involves multiple bodies, including the Reserve Bank of India, the Ministry of Finance, and SEBI.
Although cryptocurrencies are not recognized as legal tender in India, ongoing policy reviews hint at potential adjustments to the regulatory framework.
India’s Complicated Crypto Journey
From 2013 to 2017, the Reserve Bank of India issued warnings about cryptocurrency risks, yet lacked formal regulations.
As popularity surged in 2017, the RBI escalated its scrutiny due to concerns over money laundering and investor protection.
In 2018, the RBI enacted a banking ban on crypto exchanges, effectively isolating the sector from the banking system. This significantly hindered India’s cryptocurrency market until the Supreme Court ruled the ban unconstitutional in 2020, revitalizing the industry.
However, the Indian government has maintained a cautious approach. While it explores blockchain technology and the potential development of a central bank digital currency (CBDC), the future of private cryptocurrencies remains unclear. As discussions on regulation heat up, Indian crypto businesses confront obstacles relating to banking access, legal clarity, and investor protection.
Despite these challenges, India stands among the largest cryptocurrency markets globally. With its tech-savvy population and rising interest in decentralized finance (DeFi), the trajectory of India’s crypto landscape will likely influence global regulatory frameworks in the future.
