India’s cryptocurrency landscape has matured significantly over the past few years. The government and financial regulators now recognize the need to balance innovation with control. Businesses operating in the digital asset space must follow a set of strict guidelines that ensure transparency, prevent misuse, and align with international financial norms.
1. Legal Clarity and Status
India treats cryptocurrencies as Virtual Digital Assets (VDAs) under its taxation and regulatory frameworks. These assets are legal to trade, own, and transfer, but they do not qualify as legal tender. Individuals and businesses cannot use crypto to settle payments.
The Supreme Court removed the Reserve Bank of India’s (RBI) earlier banking ban on cryptocurrencies in 2020. This judgment opened the door for regulated crypto operations. Since then, India has allowed crypto trading platforms to function under specific conditions, with taxation rules and financial oversight in place.
2. Ongoing Policy Developments
In June 2025, the Indian government released a crypto discussion paper seeking public input on future regulatory measures. This initiative shows the government’s intent to develop a more comprehensive crypto framework. Although the discussion paper does not establish formal laws, it allows businesses to anticipate future policy directions.
The RBI continues to observe international trends, especially those related to Central Bank Digital Currencies (CBDCs) and crypto investment products like ETFs. The regulatory bodies intend to align Indian laws with global financial standards to attract investment while protecting the economy.
3. Multiple Regulators Involved
India’s crypto regulation does not fall under a single agency. Several authorities oversee different aspects of the industry:
- RBI monitors the overall financial system and issues warnings about crypto-related risks.
- SEBI (Securities and Exchange Board of India) steps in when crypto tokens resemble securities or investment contracts.
- FIU-IND (Financial Intelligence Unit-India) operates under the Prevention of Money Laundering Act (PMLA) and monitors crypto transactions for illegal activities.
- Ministry of Finance manages crypto taxation and compliance reporting.
Businesses must follow each of these authorities’ guidelines to remain compliant.
4. Taxation Structure for Crypto Businesses
India enforces a stringent tax regime for crypto-related income. Any business that trades, exchanges, or sells crypto assets must follow these rules:
- Apply a 30% flat tax on all profits from crypto sales. This applies even if the business earns income from mining, staking, or airdrops.
- Add a 4% health and education cess on the taxable amount.
- Deduct 1% TDS (Tax Deducted at Source) on each crypto transaction exceeding ₹10,000 in value. This applies to individual transactions and not just net gains.
- Disallow offsetting losses. Businesses cannot subtract losses from other crypto trades or business activities.
- Report all crypto transactions using a dedicated section in the income tax return, known as Schedule VDA.
In 2025, the Union Budget retained these tax rates. However, the Finance Ministry emphasized the need for accurate and real-time reporting, urging platforms to integrate automated tax collection systems.
5. AML and KYC Compliance
Crypto exchanges and related businesses must register with FIU-IND and enforce strong anti-money laundering protocols. This includes:
- Conducting Know Your Customer (KYC) checks before onboarding any user.
- Screening clients against sanction lists, including politically exposed persons (PEPs).
- Monitoring transactions continuously for suspicious activity.
- Reporting large or unusual transactions to the authorities without delay.
- Offering compliance training to staff and setting up internal audits.
These regulations aim to reduce the risk of illegal activity and align India with FATF (Financial Action Task Force) standards.
6. Global Data Sharing Through CARF
India plans to adopt the Crypto-Asset Reporting Framework (CARF) to track cross-border digital asset transactions. This global framework, developed by the Organisation for Economic Co-operation and Development (OECD), allows countries to share information about crypto holdings and trades.
Once implemented, Indian crypto businesses must collect user data related to foreign transfers and share it with tax authorities. This move will reduce tax evasion and increase transparency.
7. Return of Major Global Exchanges
Major international exchanges such as Coinbase, Binance, and KuCoin have registered with Indian regulators. These platforms have resumed operations in India after complying with the country’s AML and tax reporting laws.
Coinbase announced plans to expand retail and institutional offerings in India. Binance has improved its KYC processes and TDS collection system to meet compliance demands.
This resurgence of global players improves market liquidity and offers Indian users access to global crypto products.
8. Challenges and Risks for the Ecosystem
India faces a few roadblocks in developing a thriving crypto ecosystem:
- High tax rates have driven a significant portion of crypto trading volume to offshore platforms. Reports estimate that over 90% of trading now occurs outside India’s borders.
- Regulatory ambiguity slows institutional adoption. Investors wait for a clear legal structure before entering the market at scale.
- Cautious signals from the RBI limit the use of crypto in financial services, including lending, insurance, and payments.
Despite these hurdles, industry experts believe that formal regulation and public consultation could pave the way for long-term growth.
9. Market Size and Growth Forecast
India hosts one of the largest crypto user bases globally. As of mid-2025:
- Over 107 million Indians actively use or hold cryptocurrencies.
- The total market value of crypto assets in India has reached $6.4 billion.
- Analysts expect this figure to climb to $15 billion by 2035, driven by fintech adoption, smartphone access, and youth participation.
With such scale, India holds the potential to become a global leader in crypto innovation, provided it creates a business-friendly regulatory environment.
10. Compliance Checklist for Crypto Businesses
Every crypto business operating in India should complete the following:
- Register with FIU-IND as a Virtual Digital Asset Service Provider.
- Collect KYC data from all users, including identity documents and proof of address.
- Automate TDS collection and remittance on every qualifying transaction.
- Report all earnings and transfers under Schedule VDA in income tax filings.
- Prepare for CARF by building systems to track and share international trade data.
- Monitor updates from RBI, SEBI, and the Finance Ministry for evolving guidelines.
- Train internal teams to detect fraud, prevent misuse, and improve operational security.
What Lies Ahead
India’s crypto regulation journey continues to evolve. In the coming months, businesses should watch for:
- Policy drafts resulting from the June 2025 consultation paper.
- Amendments to the existing tax and TDS structure.
- Clearer roles for SEBI and RBI in token classification.
- Rollout of the full CARF framework for global transaction reporting.
With the right infrastructure and commitment to compliance, Indian crypto businesses can lead regional innovation while building consumer trust and government credibility.
Final Thoughts
India now operates one of the world’s most structured but strict crypto environments. Businesses that focus on transparency, regulatory alignment, and user education can succeed in this landscape. By investing in technology-driven compliance and working alongside policymakers, crypto companies can become key players in shaping the future of India’s digital economy.
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