Crypto and Digital Asset Regulations in India (Post-2025)

1. Early Phase: From Uncertainty to Recognition

The Indian crypto journey began with skepticism. In 2013, the Reserve Bank of India (RBI) first issued warnings about virtual currencies like Bitcoin, citing risks of volatility, fraud, and lack of legal backing. Between 2017 and 2018, crypto trading volumes surged across Indian exchanges such as ZebPay and CoinDCX, prompting the RBI to impose a banking ban in April 2018. This prohibited regulated entities from providing services to crypto businesses, effectively stalling industry growth.

However, in March 2020, the Supreme Court of India overturned the RBI ban, ruling that it was unconstitutional. This verdict reopened doors for the crypto sector, allowing exchanges to restart operations. This was a landmark judgment that recognized crypto assets as a legitimate digital commodity, though not yet as legal tender.

2. Post-2021 Developments: Regulatory Consolidation

From 2021 onwards, the Indian government and financial regulators started formulating frameworks to oversee the growing digital asset ecosystem. The focus was on taxation, registration, and consumer protection, rather than outright prohibition.

In Budget 2022, the Finance Ministry took a crucial step by introducing a 30% tax on income from Virtual Digital Assets (VDAs). This was a clear signal that the government acknowledged the existence of digital assets but wanted to regulate them stringently. Additionally, a 1% TDS (Tax Deducted at Source) was applied to crypto transactions exceeding ₹10,000, aimed at tracking transactions and ensuring compliance.

While this tax structure made day trading less attractive, it marked a shift from banning to monitoring. The move was followed by exchanges being required to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) norms, integrating with India’s Financial Intelligence Unit (FIU-IND).

3. The Digital India Context: Blockchain Beyond Crypto

India’s broader Digital India initiative has greatly influenced crypto policy. The government recognizes that blockchain technology — which underpins cryptocurrencies — can revolutionize financial inclusion, supply chain management, and public records.

Projects such as the Central Bank Digital Currency (CBDC), launched by the RBI as the Digital Rupee (e₹) in 2023, have demonstrated India’s willingness to explore regulated digital currencies. The CBDC aims to provide the benefits of digital transactions while maintaining state control over monetary policy.

However, private cryptocurrencies like Bitcoin or Ethereum remain outside the legal tender framework — they can be traded, but not used as official currency.

4. Current Regulatory Structure (Post-2025)

As of post-2025, India’s crypto and digital asset framework revolves around four key pillars:

a) Legal Recognition & Definitions

The Virtual Digital Asset (VDA) category covers cryptocurrencies, NFTs (Non-Fungible Tokens), and certain tokenized assets. They are recognized as digital commodities or property, not as money. The term “crypto currency” is deliberately avoided in official documents to emphasize that these are assets for investment, not currency substitutes.

b) Taxation Framework

30% flat tax on profits from digital asset transfers.

1% TDS on each transaction for monitoring purposes.

No offset of losses between different digital assets or against other income.

Gifts in digital assets are also taxable under existing income tax rules.

This framework discourages speculative trading but supports transparency and record-keeping.

c) Regulatory Bodies

RBI (Reserve Bank of India) – Oversees monetary implications and CBDC operations.

SEBI (Securities and Exchange Board of India) – May regulate tokenized securities or investment contracts.

FIU-IND – Monitors compliance with AML and KYC norms.

Finance Ministry – Leads policy formation and taxation oversight.

d) Exchange & Custody Regulations

Crypto exchanges are now required to:

Register under FIU-IND as “reporting entities.”

Maintain complete transaction and user data for audit purposes.

Ensure compliance with international FATF (Financial Action Task Force) standards.

Implement cold wallet storage and cybersecurity frameworks for asset safety.

5. Investor Protection and Market Discipline

Post-2025, investor protection remains a top priority. Regulators aim to protect retail investors from frauds, Ponzi schemes, and misleading promotions. Exchanges must provide disclosures on risk, volatility, and regulatory uncertainty.

Educational campaigns are being promoted through both government and industry initiatives to help investors differentiate between legitimate projects and scams. The industry also follows self-regulatory codes, inspired by SEBI norms for mutual funds and brokers.

6. India’s Stance on Global Coordination

India has been actively engaging in G20 and FATF discussions to establish global crypto standards. As G20 president in 2023, India pushed for a global regulatory framework to avoid cross-border arbitrage.

In 2025, India’s policies align with the G20-endorsed framework that calls for:

Uniform tax reporting standards (similar to the OECD’s “Crypto-Asset Reporting Framework”).

Common KYC and anti-terrorism financing standards.

Information sharing between nations on suspicious crypto transactions.

This international collaboration helps prevent misuse of crypto for money laundering or terror financing while enabling legitimate innovation.

7. Central Bank Digital Currency (CBDC) – The Digital Rupee

The Digital Rupee (e₹) represents India’s official foray into state-backed digital assets. Issued by the RBI, it functions like a virtual version of the Indian Rupee, ensuring transparency, traceability, and low-cost transfers.

Key features include:

Pilot use in wholesale and retail segments.

Interoperability with UPI and bank apps.

Programmable transactions for specific purposes (like subsidies or government payments).

The CBDC complements rather than competes with private crypto assets — providing a regulated digital payment option backed by sovereign authority.

8. Emerging Trends: Tokenization and DeFi

India’s next wave of digital asset regulation focuses on tokenized real-world assets (RWA) and Decentralized Finance (DeFi). Tokenization allows physical assets such as real estate, art, or bonds to be represented digitally, creating liquidity and transparency.

However, regulators are cautious about DeFi projects due to the anonymity involved. The focus remains on regulated innovation, where blockchain is used under frameworks ensuring identity verification and financial stability.

9. Challenges Ahead

Despite progress, India faces several challenges:

Tax Burden: The 30% tax and 1% TDS discourage active participation.

Lack of Clear Legal Status: Crypto is not illegal, but not officially legal either.

Banking Hesitancy: Some banks remain cautious in offering services to exchanges.

Regulatory Fragmentation: Multiple agencies overlap in jurisdiction, slowing innovation.

Still, the policy direction is moving toward clarity, control, and co-existence.

10. The Road Ahead

Looking beyond 2025, India aims to establish a Comprehensive Digital Asset Regulation Bill that classifies different asset types (utility tokens, security tokens, stablecoins) and provides guidelines for their issuance, trading, and taxation.

The focus will be on:

Integrating blockchain in public infrastructure.

Encouraging innovation in Web3 and fintech startups.

Aligning with global best practices to make India a regulated digital asset hub.

With its young tech-driven population and strong fintech ecosystem, India has the potential to lead in responsible crypto innovation while maintaining financial sovereignty.

Conclusion

Post-2025, India’s crypto and digital asset regulations reflect a measured and pragmatic approach — not anti-crypto, but pro-regulation. The government acknowledges the transformative power of blockchain while safeguarding against financial risks. Through structured taxation, compliance requirements, and global coordination, India is building the foundation for a transparent, secure, and innovation-friendly digital asset ecosystem.

As policies mature, the country’s focus will likely shift from control to collaboration — enabling India to play a leading role in shaping the future of global digital finance.