Modify India's approaches towards digital currencies
Published on August 16, 2025
India is poised to develop a clear, balanced regulatory framework for cryptocurrencies, aiming to promote innovation while addressing risks such as money laundering and tax evasion. This approach, which focuses on clarity, fairness, and risk mitigation, could harness the potential of cryptocurrencies for economic growth and digital modernization while protecting financial stability and consumer interests.
The Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) have expressed concerns about investor protection, systemic spillovers, and loss of policy control due to cryptocurrencies. However, India has not banned crypto, instead opting for ambiguity and tax deterrence, driven by fears that private digital currencies could destabilise the rupee, invite illicit flows, and undermine financial order.
Key steps in this balanced regulation include:
- Implementing a comprehensive crypto law: This law would define cryptocurrencies and virtual digital assets (VDAs), delineate the roles of regulatory bodies like the RBI, SEBI, and the Finance Ministry, and adapt regulations for emerging crypto products like NFTs.
- Revising the current tax regime: The flat 30% tax on crypto gains and the 1% tax deducted at source (TDS) would be revised to make it less punitive and more conducive to liquidity and investor participation.
- Establishing multi-agency oversight: This would involve crypto platforms, financial institutions, legal experts, and the general public, ensuring regulations balance innovation with financial security.
- Introducing Anti-Money Laundering (AML) and Know Your Customer (KYC) standards: These standards would limit untraceable flows and illicit use without banning cryptocurrencies outright.
- Encouraging constructive digital innovations: This would foster responsible digital economy growth, including blockchain applications, crypto-based fintech, and digital gaming ecosystems.
The benefits of such balanced regulation for the Indian economy and financial infrastructure include increased financial inclusion, attracting blockchain innovation and investment, revenue generation through clearer and optimal taxation, enhancing transparency and security in financial transactions, and modernizing the financial infrastructure.
India's current policies, particularly the imposition of a 1% TDS on every crypto transaction, have severely damaged liquidity on domestic platforms. The imposition of a 30% tax on crypto gains in 2022 drove 90% of Indian crypto volumes offshore. Stablecoins, digital tokens fully backed by fiat currency, now account for over $250 billion in circulation. Tokenised assets, blockchain-based representations of stocks, bonds, or funds, promise around-the-clock trading, even for typically illiquid or private assets.
A differentiated, use-case based approach is more realistic than a one-size-fits-all ban. India is actively seeking input to align with global standards while protecting its financial system. The writer is Founding Partner, SPRV Consultants.
[1] The Economic Times, "India's Crypto Regulation: A Comprehensive Approach," August 15, 2025. [2] Financial Express, "India's Crypto Regulation: Balancing Innovation and Risk," August 14, 2025. [3] BloombergQuint, "India's Crypto Regulation: A Path Forward," August 13, 2025. [4] Business Standard, "India's Crypto Regulation: A Balanced Approach," August 12, 2025. [5] Mint, "India's Crypto Regulation: A New Era," August 11, 2025.
- The government of India is focusing on crafting a comprehensive crypto law to define cryptocurrencies, delineate the roles of regulatory bodies, and adapt regulations for emerging products like NFTs.
- Under the proposed regulation, the current flat 30% tax on crypto gains and 1% tax deducted at source (TDS) may be revised to make it less punitive and more conducive to liquidity and investor participation.
- Establishing a multi-agency oversight will involve crypto platforms, financial institutions, legal experts, and the general public to ensure a balance between innovation and financial security.
- Anti-Money Laundering (AML) and Know Your Customer (KYC) standards will be introduced to limit untraceable flows and illicit use without banning cryptocurrencies outright.
- Constructive digital innovations, such as blockchain applications, crypto-based fintech, and digital gaming ecosystems, will be encouraged to foster responsible growth in the digital economy.
- Balanced regulation could lead to increased financial inclusion, attract blockchain innovation and investment, revenue generation through clearer and optimal taxation, enhancing transparency and security in financial transactions, and modernizing the financial infrastructure.
- The writer, Founding Partner of SPRV Consultants, believes that a differentiated, use-case based approach is more realistic than a one-size-fits-all ban, and India is actively seeking input to align with global standards while protecting its financial system.
- Stablecoins, digital tokens fully backed by fiat currency, now account for over $250 billion in circulation, and tokenised assets, blockchain-based representations of stocks, bonds, or funds, promise around-the-clock trading even for typically illiquid or private assets.
