India’s approach to cryptocurrency regulation has undergone significant changes in recent years, profoundly influencing the domestic crypto market. The government’s evolving stance aims to balance innovation with investor protection and financial stability.
Taxation Policies
In 2022, India introduced a 30% tax on profits from cryptocurrency transactions and a 1% Tax Deducted at Source (TDS) on crypto sales exceeding ₹50,000 per financial year. These measures were designed to formalize the crypto market and increase government revenue. However, the high tax rates have been a deterrent for some investors, potentially hindering market growth. KYC Hub+1Crypto Council for Innovation+1
Regulatory Oversight
The Financial Intelligence Unit (FIU) has been proactive in enforcing compliance among crypto exchanges. In December 2023, the FIU issued show-cause notices to nine offshore cryptocurrency exchanges for non-compliance with the Prevention of Money Laundering Act (PMLA). Subsequently, in June 2024, Binance was fined $2.25 million for operating in India without adhering to local anti-money laundering regulations. Reuters+5Wikipedia+5Digital Watch Observatory+5GLI+3Crypto Council for Innovation+3Reuters+3
Market Impact
Despite stringent regulations, India has emerged as a global leader in cryptocurrency adoption. A report by Chainalysis highlighted that India led in crypto adoption for the second consecutive year as of September 2024. This indicates a robust interest in cryptocurrencies among Indians, even amidst regulatory challenges. Reuters
International Developments and Policy Revisions
Global shifts in crypto policies, particularly in the United States, have prompted India to revisit its own stance. In February 2025, Economic Affairs Secretary Ajay Seth acknowledged that due to the cross-border nature of crypto assets, India’s approach cannot be unilateral. This review may delay the release of a discussion paper on cryptocurrencies that was initially expected in September 2024. Reuters
Recent Developments
In March 2025, Coinbase registered with India’s FIU, signaling a potential re-entry into the Indian market. This move reflects a shift in India’s regulatory environment, possibly influenced by global trends and domestic market dynamics. Reuters+1Financial Times+1
India’s crypto laws are in a state of flux, shaped by domestic policy decisions and international developments. While the government aims to create a regulatory framework that ensures market integrity and investor protection, the high taxation and stringent compliance requirements pose challenges for market participants. As the global crypto landscape evolves, India’s policies are likely to adapt in response to emerging trends and economic considerations.
