Cryptocurrencies are now a major focus of attention in the financial world, but at the center of global policy discussion. The number of people investing in crypto globally is estimated to be 560 million in 2025. More than 107 million people in India have invested in cryptocurrencies, making the country one of the largest crypto markets in the world.
However, there is still one major problem: no proper law on cryptocurrency regulation in India. The government surely added taxes and made some rules, but there is so much confusion for investors, businesses. So what about the safety of investors? Still no answer.
But the Supreme Court has raised concerns that India’s current laws are outdated in dealing with cryptocurrencies and declared the need for proper laws on Crypto regulation in India. Cryptocurrency is not only about the integration of AI but more about the need for proper regulation.
This article provides insight into evolving cryptocurrency regulation in India and the current state of law and the challenges, and prospects.
Timeline on cryptocurrency regulation in India
| TIMELINE | |
|---|---|
| 2013–2017 | The Reserve Bank of India issued a warning in 2013, cautioning people about the risk associated with cryptocurrencies like Bitcoin, Ethereum. As it may involve fraud, scam, and money laundering. This marked the beginning of discussions around cryptocurrency regulation in India. |
| 2018 | In April 2018, the RBI told banks not to provide services to cryptocurrency companies. This made it hard for crypto exchanges to work. The ban aimed to stop fraud and money laundering but was strongly opposed by the crypto industry. This step by the RBI cryptocurrency guidelines reflected early efforts at Indian crypto rules. |
| 2020 | In March 2020, the Supreme Court lifted the RBI’s 2018 ban on cryptocurrency transactions. Banks were allowed to associate themselves with crypto businesses once again. This was seen as a turning point in crypto regulation in India. |
| 2022 | The government made new rules for virtual digital assets (VDAs). tax on crypto profits at 30%, deducting 1% tax on big crypto transactions. This was the first official step to regulate crypto, but there was still no full law. However, who regulates cryptocurrency in India remained unanswered. |
| 2023-2024 | Crypto transactions are now under the Prevention of Money Laundering Act. This means crypto exchanges need to verify users through KYC and watch for suspicious activities. At the same time, a proposed law called the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. However, the bill was never passed. |
| 2025 | In 2025, the Supreme Court of India said the current law is too old and asked the government to create a proper law to regulate crypto. |
Current Crypto regulation in India
Cryptocurrencies are not banned, but they are not an official form of money. People in India can buy, sell, and hold cryptocurrencies like Bitcoin or Ethereum, but they can’t be used for everyday transactions. So, crypto is currently in a gray area in terms of cryptocurrency regulation in India.
RBI is very cautious about it and constantly warns that crypto might be harmful for the economy if not properly controlled. RBI is focusing on its own RBI cryptocurrency, that are digital and hasn’t made any clear laws for private cryptocurrencies. The Securities and Exchange Board of India (SEBI) doesn’t control cryptocurrency or a regulatory role, which raises the question of who regulates cryptocurrency in India in the absence of a defined cryptocurrency regulatory body in India.
Difference between digital rupee and cryptocurrency
| Feature | Digital Rupee (CBDC) | Cryptocurrency (e.g., Bitcoin, Ethereum) |
| Who creates it? | Made by the Reserve Bank of India (RBI) | Made by private individuals or groups |
| Is it legal money? | Yes, it is official legal tender in India | No, it is not legal tender, but people can invest in it |
| Who controls it? | Controlled and regulated by the RBI | Not controlled by any central authority |
| Is the value stable? | Yes, it stays stable and is linked to the Indian Rupee | No, the value keeps changing a lot depending on the market |
| Technology used | May use blockchain or similar technology, but managed centrally | Uses blockchain, works in a decentralized way |
| Can it be tracked? | Yes, the government can monitor all transactions | Transactions are semi-private, not directly tracked by any agency |
| Gives interest? | No interest is given | No interest is given |
| Main use | Meant for regular payments and digital cash | Mostly used for investment, trading, or sometimes as digital money |
| Security | High security as per RBI standards | Depends on the blockchain and how safely users handle it |
| Examples | Digital Rupee (e₹), e-Rupee | Bitcoin, Ethereum, Dogecoin, and others |
Taxation on Crypto & VDAs in India
A VDA is anything digital that holds value and can be bought, sold, or traded online. Think of it like online property or money. It includes cryptocurrency, NFTs, and other digital tokens like stablecoin or game tokens. VDA is treated like property or capital assets by the government. which means you have to pay tax if you earn money from them. This treatment plays a key role in the current cryptocurrency regulation in India.
How Are VDAs Taxed in India?
India has strict rules that make sure that people don’t misuse crypto or avoid paying crypto taxes. If you make money by selling, exchanging, or transferring a VAD, you have to pay 30% tax. The rate stays the same, despite how long you hold it. For instance, if you purchase Bitcoin for ₹1,00,000 and later sell it for ₹1,50,000, you will owe a 30% tax on the ₹50,000 profit you made.
Every time you sell a VDA worth more than ₹10,000 or ₹50,000, the buyer deducts 1% from the sale amount and provides it to the government as a tax.
If someone gifts you a crypto token or NFT, you may need to pay tax unless it is from a close relative or an exception. This falls under the broader scope of crypto regulation in India, particularly concerning digital asset transfers and gifts.
Compliance Burden on Exchanges and Users
In India, both cryptocurrency exchanges and users have to follow rules to ensure transparency.
For Crypto Exchanges: Follow Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures. This means they must verify the users, track transactions, and report all crypto-related activities to the tax authorities, as directed by the evolving cryptocurrency regulatory body in India.
For users: Any user who buys, trades, or sells cryptocurrency must report all virtual digital asset transactions in a separate section of their Income tax return. The smallest trade needs to be recorded, according to the current RBI cryptocurrency compliance expectations.
If you fail to follow these rules, it can lead to penalties. This includes fines and legal consequences both for individuals and exchanges.
What Indian Crypto Rules Might Come in India
Proposed Measures
- Licensing of exchanges: The government may soon bring a new policy in which crypto exchanges might get a license to operate. Only safe and verified platforms will be allowed. which will protect users and ensure all exchanges follow the same Indian crypto rules.
- Classification of tokens and stablecoins: Right now, all tokens are treated the same, but soon payment tokens like bitcoin, utility tokens, security tokens like shares, and stablecoins might be put in different categories. Each category might be looked by different regulators like the RBI or SEBI, depending on the function. This will help establish better cryptocurrency regulation in India.
- Self-Regulatory Organization (SRO) discussions: Industry stakeholders are advocating for the creation of a self-regulatory organization to make safety rules for all exchanges, solve small disputes, and work with the government until proper laws are passed, paving the way for a structured cryptocurrency regulatory body in India.
- Wallet security, data localization: Expecting measures that bring stricter rules on wallet security, enhanced cybersecurity standards, and data localization as a part of better crypto regulation in India.
Digital Rupee (CBDC)
The Digital Rupee (e₹) is India’s official digital money, made and controlled by the Reserve Bank of India (RBI). It’s like regular cash, but completely digital.
- Pilot Status: The Digital Rupee is still in its testing phase. The RBI is gradually expanding its use to more people and businesses. The focus is on making sure it is safe, works well with existing payment systems, and can handle large-scale use.
- Regulation: The Digital Rupee is fully regulated and backed by the RBI. It is a legal form of digital money issued by the government, unlike private cryptocurrencies that are still outside the scope of any firm cryptocurrency regulatory body in India.
- Why It Matters: It aims to modernize payments, reduce the use of cash, and provide a stable digital currency.
- Difference from Cryptocurrencies: The Digital Rupee is legal tender, government-backed, and stable. Private cryptocurrencies like Bitcoin are not legal tender, not regulated, and highly volatile, raising concerns about crypto regulation in India.
India may bring stricter rules to stop offshore crypto trading, improve enforcement on decentralized platforms, and ensure better banking access for registered exchanges, cryptocurrency regulation in India.
Regulatory Challenges in India's Cryptocurrency
- Absence of comprehensive legislation: Cryptocurrency is still a grey area with only tax and compliance rules. India lacks cryptocurrency regulation or granting them status under any central cryptocurrency regulatory body in India.
- High tax deters adoption: The Indian government has put high taxes on crypto, which discourages people from trading and investing in cryptocurrency in India. As a result, normal investors and big companies feel that Indian crypto rules are harsh and have moved their trading to foreign platforms.
- Regulatory uncertainty is hurting startups: The delay in passing the Cryptocurrency Bill and the absence of clear, unified regulations have created a challenging environment for blockchain startups and crypto businesses. Entrepreneurs struggle to secure funding and grow their companies because the rules around crypto regulation in India remain uncertain and may change unexpectedly.
- Supreme Court criticism of delays and loopholes: The Supreme Court criticized the government for the delayed approval of the comprehensive regulation. The court also highlighted loopholes that can lead to tax evasion and offshore trading, concerns that further stress the need for proper oversight and clarity on who regulates cryptocurrency in India.
- Overregulation vs. underprotection: The industry is divided: some fear overregulation suffocates innovation and drives talent abroad, while others worry that underregulation can expose consumers to scams and market manipulation. Even the RBI cryptocurrency stance reflects this tension between caution and innovation.
Global Cryptocurrency Regulation vs Indian Crypto Rules
| Region | Regulatory Approach & Status | Key Features | Impact on Investors and Industry |
| EU (MiCA) | Comprehensive, unified, and investor-friendly framework (MiCA fully in force since Dec 2024) | – Pan-European licensing for crypto service providers- Strong consumer protections- Clear rules for stablecoins and tokens- Passporting rights across the EU- AML compliance required | High investor confidence, legal clarity, and seamless market access across the EU |
| US | Fragmented regulation; conflicts among the SEC, CFTC, and state laws | – No unified federal framework- Overlapping authority- Enforcement-driven regulation | Legal uncertainty and high compliance burden for businesses |
| UAE / Singapore | Structured licensing and crypto-supportive policies | – Mandatory licensing for exchanges and wallets- Clear KYC/AML rules- Pro-innovation regulatory stance | Startup-friendly environment, secure for investors |
| India | High tax burden and unclear regulations; lacks a comprehensive framework | – 30% tax on gains, 1% TDS- KYC/AML norms for exchanges- No formal licensing- Not recognized as legal tender | Regulatory uncertainty, capital flight to offshore platforms, and limited innovation |
Impact of Indian Crypto Rules on Stakeholders
| Stakeholder | Impact |
| Investors | Moving to offshore platforms because of high taxes and unclear regulations |
| Startups | Struggling with funding and considering relocation due to regulatory uncertainty and compliance challenges |
| Exchanges | Facing compliance difficulties, operational hurdles, and inconsistent banking support |
| Government | Collects tax revenue but risks losing innovation and missing tax from offshore crypto activities |
Conclusion
India’s crypto sector in 2025 will face significant regulatory uncertainty with unclear laws and high taxes pushing many investors and businesses offshore. Private cryptocurrencies are unregulated, while the RBI is focused on the digital rupee, which offers a government-backed digital currency. Clear crypto regulation in India and strong enforcement are needed to protect investors, support innovation, and ensure growth in India’s crypto markets. If you like this article, you can also check out the Jio coin price.
FAQS
Is cryptocurrency banned in India in 2025?
No. Cryptocurrencies are not banned in India. You can legally buy, sell, and hold them. However, they are not recognized as legal tender, so they can’t be used for daily purchases. This reflects the current Indian crypto rules, where regulation exists in a limited form but not a complete ban.
What taxes do I have to pay on cryptocurrency in India?
You must pay a 30% tax on profits from crypto transactions, no matter how long you hold them. Additionally, a 1% TDS is deducted on transactions above ₹10,000 or ₹50,000, depending on the case. These rates are part of the current cryptocurrency regulation in India.
Do I have to report all my crypto trades in my tax return?
Yes. All Virtual Digital Asset (VDA) transactions must be reported in a separate section of your Income Tax Return (ITR), even for small trades.
Is there a law to regulate crypto in India?
As of 2025, there is no comprehensive crypto law. While there are tax and compliance rules, the Supreme Court has called for a proper cryptocurrency regulatory body in India, saying current laws are outdated.
What is the difference between the Digital Rupee and cryptocurrencies?
The Digital Rupee is issued and regulated by the RBI and is an official legal tender. Cryptocurrencies like Bitcoin or Ethereum are private, unregulated, and not legal tender, highlighting the contrast in the RBI cryptocurrency approach versus private tokens.
Are crypto exchanges regulated in India?
Crypto exchanges must follow KYC and AML rules under the Prevention of Money Laundering Act, but no formal license is currently required. A licensing framework may come soon.
What are the compliance rules for crypto users and exchanges?
Exchanges must follow KYC, track transactions, and report to authorities. Users must report all crypto activities in their tax returns, or they may face penalties or legal action.
What are the main challenges facing crypto regulation in India?
High taxes discourage adoption, unclear laws hurt startups, and the lack of a proper legal framework creates confusion. The Supreme Court has also criticized delays and loopholes in the current system, which slows the development of a stable crypto regulation in India.
