Crypto regulation in India: After years of distance from cryptocurrencies, the government appears to be shifting course. India’s crypto policy has long rested on an uneasy duality. Virtual digital assets are taxed at 30% on gains, yet the absence of a designated market regulator has left exchanges, investors and enforcement agencies operating in a gray zone.
The finance ministry is now in discussions with SEBI and the RBI ahead of the Union Budget 2026–27 to put a regulatory framework in place. SEBI is expected to act as the primary supervisor for crypto exchanges, while the RBI may oversee issues linked to foreign investment, cross-border transactions and capital flows.
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India among top 5 crypto nations
India is not a peripheral player in global crypto markets. Data from Chainalysis consistently places India among the top five countries by number of crypto users. Domestic exchanges and offshore platforms serving Indian residents together account for tens of millions of accounts. Even after the sharp fall in volumes following the 1% TDS introduced in July 2022, activity has stabilised. Monthly trading volumes are estimated at $1.5–2 billion. That scale alone makes continued regulatory ambiguity untenable.
At present, oversight is fragmented. The tax department tracks virtual digital assets for revenue purposes. The Financial Intelligence Unit monitors compliance with anti-money laundering norms. Enforcement agencies step in when illicit flows are suspected. What is missing is a single authority responsible for market conduct, disclosures, custody standards and investor protection. Seen in that light, the Finance Ministry’s proposed division of labour is less an expansion of control than an attempt at institutional clarity.
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Crypto regulation and SEBI track record
SEBI’s track record in supervising stock exchanges, mutual funds and market intermediaries gives it the institutional capacity to impose governance standards and curb manipulation. Crypto markets are volatile and pricing is opaque. Leaving them entirely outside the market regulator’s perimeter was always an anomaly.
India is yet to finalise the legal character of crypto assets. Beyond their definition as “virtual digital assets” in tax law, cryptocurrencies sit uneasily between securities, commodities and payment instruments. Without legislative clarity, SEBI’s jurisdiction could rest on administrative interpretation rather than statute, and overlaps with foreign exchange rules and the RBI’s monetary mandate will persist. The central bank has long warned that private cryptocurrencies pose systemic risks, a position that has not been formally reconciled with the current regulatory turn. A durable framework will eventually require Parliament to draw clearer legal boundaries.
Officials also concede that high taxation without regulatory oversight has limited the state’s ability to trace the lifecycle of crypto transactions and assess tax liabilities accurately. Offshore exchanges, decentralised platforms and private wallets allow funds to move across borders with ease, often beyond the reach of Indian authorities. Crypto regulation will not eliminate these channels, but it can narrow the blind spots that complicate investigations into money laundering, fraud and terror financing.
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Crypto asset reporting in India
India has endorsed the OECD’s Crypto-Asset Reporting Framework, which seeks to standardise the automatic exchange of information on crypto transactions across jurisdictions. Without regulated intermediaries capable of collecting and sharing transaction-level data, that commitment will remain largely notional.
Sceptics argue that the decentralised nature of crypto makes traditional oversight ineffective. That objection misses the practical choice facing policymakers. The decision is not between perfect control and regulatory vacuum. It is whether India builds a regulated core of compliant platforms or allows activity to drift further into informal and offshore spaces. Experience suggests that once a credible framework exists, a large share of legitimate activity gravitates towards regulated entities.
Global precedents point in the same direction. The European Union’s Markets in Crypto-Assets regime has introduced a single licensing framework with capital and consumer safeguards. In the United States, legislative efforts are focused on bringing stablecoins and major intermediaries within a defined regulatory perimeter. These models are incomplete, but they reflect a shared recognition that crypto markets are too consequential to remain outside formal oversight.
India’s own history with financial innovation offers a parallel. Payment wallets and peer-to-peer lending began in regulatory shadows and matured once clear rules were laid down. Regulation did not extinguish innovation. It filtered out weaker players and created conditions for sustainable growth. Crypto is now at a similar inflection point.
The harder task will be calibration. Excessive compliance burdens could push activity offshore. A minimalist approach would reassure neither investors nor enforcement agencies. Getting the balance right will require consultation with industry, technologists and consumer groups, and a willingness to adjust rules as the market evolves.
For a country that prides itself on regulatory capacity in complex financial markets, the question is no longer whether to go ahead with crypto regulation. It is whether India can do so with sufficient clarity and restraint. The move towards formal oversight offers relief to consumers and platforms alike. It also closes a chapter of deliberate ambiguity that had outlived its usefulness.