Navigating India's Evolving Crypto Regulatory Landscape
India’s cryptocurrency landscape is growing every day, with more than 107 million users driving a digital asset market valued at approximately $6.4 billion. However, there is still regulatory ambiguity as the authorities are still working towards a framework that balances innovation with security.
In the meantime, enforcement has intensified under existing laws. The Financial Intelligence Unit (FIU-IND) recently issued notices to 25 offshore platforms, and a landmark Madras High Court ruling recognised cryptocurrencies as “property,” signalling a gradual move toward legal clarity.
However, challenges such as high taxation, compliance obligations, and ongoing anti-money-laundering (AML) scrutiny continue to shape the landscape.
This guide explores India’s evolving crypto regulations, legal status, taxation structure, and what lies ahead for investors navigating an uncertain but maturing market.
The Rise of Cryptocurrency in India
Cryptocurrency’s journey in India began in 2009 with Bitcoin’s introduction, but mainstream awareness surged during the 2017 bull run when prices skyrocketed nearly 1,900%.
By 2025, India has emerged as a global crypto leader, supported by 800 million smartphone users, 900 million internet connections, and a growing appetite for digital finance.
Young investors aged 18–35 now drive nearly 70% of the country’s crypto adoption. India also ranks first globally in crypto adoption, fuelled by strong remittance inflows, decentralised finance (DeFi) yields offering 8–15% annual returns, and rising interest in staking and blockchain projects.
Despite challenges, including exchange security incidents and a strict tax regime, India’s crypto community remains resilient. The sector’s contribution to financial inclusion, especially for unbanked populations, continues to grow, supported by blockchain use cases in remittances, tokenisation, and digital identity.
Legal Status of Cryptocurrency in India
Cryptocurrency in India occupies a legal grey area, it is not banned, but it is not recognised as legal tender either. Instead, digital assets are classified as Virtual Digital Assets (VDAs) under the Income Tax Act.
In March 2020, the Supreme Court overturned the Reserve Bank of India’s banking ban on crypto businesses, restoring access to payment systems and legitimising exchange operations. The Madras High Court’s 2025 ruling further strengthened this position by recognising cryptocurrencies as property that can be held in trust and attached in legal proceedings.
While there is no outright ban, crypto platforms must comply with the Prevention of Money Laundering Act (PMLA) and related AML regulations. Offshore exchanges that fail to meet these standards have been blocked, signalling a shift toward stronger domestic oversight.
The proposed Cryptocurrency and Regulation of Official Digital Currency Bill (2021) remains pending, with the government favouring incremental regulation through taxation and AML enforcement instead of blanket prohibition.
Key Milestones in India’s Crypto Regulation
India’s regulatory evolution has transitioned from restriction to structured supervision over the past decade:
- 2013: RBI issues initial warnings on crypto risks.
- 2018: RBI bans banks from crypto dealings.
- 2020: Supreme Court lifts the ban, reviving exchanges.
- 2022: 30% tax on crypto gains introduced.
- 2023: FIU mandates VDA registration.
- 2025: GST at 18% on exchange services; Madras High Court recognises crypto as property; FIU blocks 25 offshore exchanges.
Taxation of Cryptocurrency in India
The 2022 Union Budget established clear tax rules for Virtual Digital Assets. Profits from crypto transactions are taxed at a flat 30% rate, plus a 4% cess, bringing the effective tax to around 31.2%.
A 1% Tax Deducted at Source (TDS) applies on every transaction above ₹50,000, while crypto-related services such as exchange trading now attract an 18% GST. Losses from crypto investments cannot be offset against other gains, nor can they be carried forward.
Investors must report holdings and profits under Schedule VDA in their Income Tax Return (ITR-2 or ITR-3)**. These stringent tax measures aim to promote transparency and discourage speculative trading, though they have also affected liquidity and short-term participation.
The FIU and Reporting Requirements
The Financial Intelligence Unit (FIU-IND) plays a central role in enforcing crypto compliance. Since 2023, all Virtual Digital Asset Service Providers (VASPs) have been required to register with the FIU under the PMLA framework.
Exchanges must maintain detailed KYC records, report large or suspicious transactions, and submit periodic compliance audits. Non-registered or non-compliant offshore exchanges have been blocked in India to prevent money laundering and ensure consumer protection.
This regulatory tightening has increased trust in registered domestic exchanges and encouraged greater investor confidence in the ecosystem.
Privacy Coins, Mining, and DeFi
Privacy-focused cryptocurrencies such as Monero (XMR) and Zcash (ZEC) are under regulatory scrutiny for their untraceable nature, though no formal ban exists. Mining activities remain legal in India but are taxed as business income, and energy-consumption concerns have prompted limited state-level restrictions.
DeFi, staking, and yield-farming activities are also taxable but currently unregulated under any dedicated framework. The government is expected to introduce clearer guidelines for these segments in upcoming financial years, especially as DeFi adoption and total value locked (TVL) continue to rise.
The Future of Crypto in India
India’s crypto market is expected to grow significantly, with estimates suggesting a potential $50 billion valuation by 2030. Key opportunities include blockchain-based remittance solutions, tokenisation of real-world assets, and DeFi-driven financial inclusion for millions.
However, risks remain, regulatory uncertainty, high taxation, scams, and market volatility continue to affect investor sentiment. Institutional participation may increase once licensing frameworks and custody rules are introduced, likely in 2026.
The rollout of India’s Central Bank Digital Currency (CBDC), or e-Rupee, is another step toward digital finance maturity. Integration of CBDCs with private blockchain systems could pave the way for regulated innovation in decentralised finance.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.
Updated on: 12th November, 2025 2:37 PM
FAQ's
1. Is crypto legal in India?
Yes, trading is legal, but crypto is not legal tender. It is recognised as a Virtual Digital Asset (VDA).
2. What taxes apply to crypto gains?
30% on profits plus 1% TDS and 18% GST on services.
3. Can I trade on offshore exchanges?
Only if they comply with Indian AML/KYC regulations. Non-compliant platforms have been blocked.
4. Is mining legal?
Yes, but it is taxable as business income and subject to energy-usage regulations.
5. Can I offset losses?
No, losses from crypto trades cannot be set off or carried forward.
India’s crypto evolution from banking bans to judicial recognition of digital assets as property reflects a market steadily moving toward maturity. Enforcement through FIU registration, taxation, and compliance requirements has created a more transparent environment, even in the absence of a single comprehensive law.
For investors, the focus should be on compliance, diversification, and awareness. As India’s digital asset ecosystem evolves, platforms like Giottus are empowering users to participate responsibly and securely in the crypto economy bridging innovation with regulation in one of the world’s fastest-growing markets.
