Crypto Overview in India

Regulatory data is for informational purposes only and may not reflect the most current legal developments. Always consult qualified professionals before making decisions.

Legal Classification and Regulatory Framework

Cryptocurrency Status

India has adopted a cautious yet permissive approach to cryptocurrency regulation. Cryptocurrencies are legally classified as Virtual Digital Assets (VDAs) under Section 2(47A) of the Income Tax Act, 1961, a definition introduced through the Finance Act 2022. While buying, holding, selling, and trading VDAs is legal, they are not recognised as legal tender and cannot be used as a medium of exchange for goods and services. In 2025, the Madras High Court became the first Indian court to formally recognise crypto as property, ruling that digital assets are capable of being legally held, traded, and protected in disputes. This landmark ruling, arising from the WazirX restructuring case, added a layer of common-law recognition that reinforced holders’ rights pending formal legislation.

India does not currently have comprehensive crypto-specific legislation. Regulation is achieved through a patchwork of existing laws covering taxation, anti-money laundering, and securities oversight. The Cryptocurrency and Regulation of Official Digital Currency Bill 2021, which had proposed banning most private cryptocurrencies, was never introduced in Parliament and remains shelved. In September 2025, a government document reported by Reuters indicated that India was leaning against introducing comprehensive regulation, citing concerns that formal legislation might legitimise crypto and create systemic risk. By April 2026, a new policy paper had been shelved again with no timeline. In May 2025, the Supreme Court questioned the government’s prolonged inaction, describing the absence of a framework as a fertile ground for misuse.

Tax Treatment

Under Section 115BBH of the Income Tax Act, all gains from the transfer of VDAs are subject to a flat 30% rate plus applicable surcharges and cess, regardless of the holding period. No deductions are permitted beyond the cost of acquisition, and losses cannot be offset against any income or carried forward to future years.

Section 194S imposes a 1% Tax Deducted at Source (TDS) on transfers above ₹10,000 per year in most cases, or ₹50,000 for specified persons such as individuals not subject to tax audit. Gifts of VDAs above ₹50,000 are taxable for the recipient unless specific exemptions apply. Mining and staking income is taxed based on the nature of the activity. The Union Budget 2026 left all VDA tax rates unchanged. Effective April 1, 2026, reporting entities failing to file crypto transaction statements under Section 509 of the Income Tax Act face ₹200 per day of default; incorrect or uncorrected reporting attracts a flat ₹50,000 penalty. All crypto income must be declared in income tax returns under Schedule VDA.

Regulatory Oversight

India uses a multi-agency model for crypto oversight. The Ministry of Finance leads policy formulation and tax coordination. The Reserve Bank of India (RBI) focuses on monetary policy, systemic risk, and the CBDC programme. The Financial Intelligence Unit-India (FIU-IND) serves as the primary AML/CFT enforcement body for Virtual Asset Service Providers. The Securities and Exchange Board of India (SEBI) has signalled a willingness to take on oversight of tokens that resemble securities, and has been proposed as the natural regulator for security-token offerings under any future framework, though no statutory two-tier classification has been enacted to date. The Central Board of Direct Taxes (CBDT) administers VDA income reporting and penalty enforcement.

Business Environment

Banking Relationships

Banking access for crypto businesses was restored following the Supreme Court’s March 2020 ruling in Internet and Mobile Association of India v. Reserve Bank of India, which struck down the RBI’s 2018 circular prohibiting banks from servicing crypto entities. Banks processing fiat transactions for crypto exchanges must themselves comply with PMLA AML guidelines and in practice prefer registered counterparties with documented KYC and compliance programmes. Major domestic and international exchanges that have completed FIU-IND registration maintain operational banking relationships for fiat on-ramps and off-ramps.

Innovation Support

India has invested in blockchain infrastructure through its Central Bank Digital Currency (CBDC) programme. The RBI launched wholesale and retail e-Rupee pilot programmes in 2022. By March 2025, the pilot had expanded to 17 banks and over six million users, with ₹1,016 crore in circulation, a 334% year-on-year increase. In January 2025, fintech partners MobiKwik, CRED, and Yes Bank joined the ecosystem. The RBI launched deposit tokenization trials in October 2025 and has conducted cross-border CBDC trials with the United Arab Emirates and Singapore. A CBDC-based food subsidy distribution pilot under the Pradhan Mantri Garib Kalyan Anna Yojana scheme commenced in Puducherry in 2026.

Crypto License in India

India does not operate a formal crypto licensing regime. There is no dedicated virtual asset service provider licence issued by any Indian regulator. Instead, VASPs serving Indian users are required to register as Reporting Entities with FIU-IND under the Prevention of Money Laundering Act 2002, a mandatory compliance step that functions as the closest equivalent to a regulatory authorisation. SEBI has been proposed as the likely supervisor for security-token activity under future legislation, but a unified licensing framework remains under discussion and has not been enacted as of May 2026.

Current Status

The mandatory requirement for all VASPs, including both domestic operators and offshore platforms serving Indian users, to register with FIU-IND took effect following a government notification in March 2023. Registration requires entities to submit comprehensive documentation covering their business model, compliance frameworks, KYC/Customer Due Diligence procedures, and evidence of adherence to PMLA AML/CFT obligations. Registered entities must appoint a Principal Officer responsible for liaison with FIU-IND, implement transaction monitoring systems, maintain records for at least five years, and file Suspicious Transaction Reports as required.

In January 2026, FIU-IND issued updated AML/CFT guidelines introducing mandatory CERT-In cybersecurity audits, tighter Travel Rule compliance norms for cross-border transfers, enhanced KYC requirements including live selfie verification and location tracking during onboarding, and explicit flagging of privacy coins, mixers, and tumbling services as money laundering risks. By late 2024, approximately 48 crypto entities had registered as reporting entities with FIU-IND.

Why No Licensing Framework

The absence of a licensing framework reflects the continued disagreement between Indian regulatory bodies about the appropriate treatment of private cryptocurrencies. The RBI has consistently viewed crypto as a risk to monetary sovereignty and financial stability, and has actively resisted proposals that would provide formal legitimacy to the sector. In April 2026, India’s crypto policy discussion paper was reportedly shelved following RBI opposition, leaving the government without a legislative timetable. This regulatory impasse means that no body has been mandated to issue licences, define permissible activities, or set prudential capital requirements for crypto businesses in the way that jurisdictions such as Singapore or the European Union have done under their respective frameworks.

A June 2025 government discussion paper proposed a token classification framework categorising crypto as securities, commodities, or currencies, and outlined a concept for a Crypto Assets Regulatory Authority (CARA) under a draft “COINS Act 2025.” Neither had been enacted as of May 2026. SEBI has recommended a multi-regulator model: RBI for monetary and systemic matters, SEBI for security tokens, and the Finance Ministry for policy and taxation. This architecture represents the most likely basis for any future framework, but has not been formalised in legislation.

What Operators Should Know

In the absence of a formal licence, FIU-IND registration is the operative compliance requirement for any entity offering exchange, transfer, custody, or related VDA services to Indian users. Offshore platforms that fail to register face website and application blocks by the Ministry of Electronics and Information Technology (MeitY); Binance, KuCoin, and several others were blocked in December 2023 and restored only after completing FIU-IND registration and paying penalties. Binance paid a fine of approximately $2.25 million and completed registration in August 2024; KuCoin paid approximately $41,000 and was unblocked in May 2024; Bybit was fined ₹9.27 crore in January 2025. Bitstamp and OKX chose to exit the Indian market rather than comply. Coinbase gained FIU-IND approval in March 2025. Entities dealing in tokens that may qualify as securities should independently assess whether SEBI registration or disclosure obligations apply under existing securities law.

Market Characteristics

Adoption Patterns

India represents one of the largest cryptocurrency markets globally by user base, driven by its young, tech-savvy population and the widespread digital payments infrastructure established through the Unified Payments Interface (UPI). Retail participation has been the primary driver of adoption, though the 30% flat tax rate and the 1% TDS have materially reduced trading volumes and profitability for active traders since 2022. Institutional adoption remains limited relative to retail, partly due to regulatory uncertainty and the absence of clear guidelines for institutional VDA investment. Cryptocurrency cannot be used for everyday payments, which continues to confine most market activity to investment and speculative purposes.

Industry Events

India’s market experienced its most significant disruption in July 2024 when WazirX, one of the country’s largest domestic exchanges, suffered a $234.9 million hack attributed to the Lazarus Group, a North Korea-linked threat actor. The attack exploited a flaw in a multi-signature wallet managed under a custody arrangement with Liminal Custody; both parties disputed responsibility. The exchange’s Singapore parent, Zettai Pte Ltd, sought restructuring through the Singapore High Court. A creditor-approved scheme received 93.1% support in March 2025 and was sanctioned in October 2025. WazirX restarted trading on October 24, 2025, returning approximately 85% of funds through a mix of crypto holdings and recovery tokens. The Indian Supreme Court declined to intervene in victim petitions in April 2025, citing the absence of a domestic regulatory framework.

Regulatory Evolution

SEBI’s growing involvement in policy discussions on security-like tokens points to a likely second regulatory layer alongside the existing FIU-IND registration regime. The Finance Ministry is in discussions with SEBI and the RBI ahead of the Union Budget 2026-27 to develop a coordinated architecture. India has engaged with the Financial Action Task Force (FATF), the Financial Stability Board (FSB), and the G20 to align AML and reporting standards with global norms, and has incorporated the OECD Crypto-Asset Reporting Framework (CARF) into its policy discussions. The Economic Survey 2025-2026 hinted at regulatory backing for stablecoins. Until comprehensive legislation is enacted, operators must navigate the multi-agency structure: FIU-IND for AML compliance, SEBI for security tokens, CBDT for tax reporting, and the RBI for matters touching monetary or payment system issues.