India’s Evolving Stance on Cryptocurrency: A Closer Look
India is currently reevaluating its stance on cryptocurrency in response to shifting global attitudes towards digital assets. Economic Affairs Secretary Ajay Seth recently revealed to Reuters that India’s review takes into account the changing positions of various jurisdictions regarding the usage and acceptance of cryptocurrencies. This reevaluation has caused a delay in the release of a cryptocurrency discussion paper that was initially scheduled for September 2024.
The review in India comes amidst similar actions in other countries, such as the United States, where President Donald Trump issued an executive order directing federal agencies to review regulations affecting the digital asset sector. While the order did not specifically mention Bitcoin or other cryptocurrencies, it did highlight the need to evaluate the potential creation of a national digital asset stockpile.
Despite its stringent regulatory environment, which includes a 30% capital gains tax and a 1% TDS on transactions, cryptocurrency investment has been on the rise among Indian investors. The country has maintained strict oversight, with the Financial Intelligence Unit taking action against non-compliant exchanges. For instance, in December 2023, the FIU issued notices to nine offshore cryptocurrency platforms, and Binance paid a $2.25 million fine in June 2024 to resume operations in India.
The Reserve Bank of India has consistently expressed concerns about private digital currencies, emphasizing its cautious stance in the December 2024 Financial Stability Report. However, the market regulator has suggested a multi-regulator approach to oversee cryptocurrencies, signaling a potential openness to private virtual assets among certain authorities.
The current tax structure in India remains a barrier for crypto traders, with no provisions for offsetting losses and mandatory deductions on transactions exceeding ₹50,000 per financial year. The regulatory framework involves multiple bodies, including the RBI, Ministry of Finance, and SEBI.
India’s history with cryptocurrencies has been complicated, with the RBI issuing warnings about the risks of digital assets from 2013 to 2017. The banking ban imposed on crypto exchanges in 2018 severely impacted the market until the Supreme Court’s ruling in 2020 declared the ban unconstitutional, revitalizing the industry.
While India continues to explore blockchain technology and the potential introduction of a central bank digital currency (CBDC), the fate of private cryptocurrencies remains uncertain. As discussions around regulation intensify, Indian crypto businesses face challenges in banking access, legal clarity, and investor protection.
Despite these challenges, India remains one of the largest crypto markets globally. With its tech-savvy population and growing interest in decentralized finance (DeFi), India’s evolving stance on cryptocurrency will likely influence the global regulatory landscape in the years ahead.