India’s Crypto Sector Reacts to Potential Regulatory Changes
The Indian cryptocurrency market is currently buzzing with excitement as reports suggest the government is reconsidering its regulatory approach to digital assets. With global frameworks for cryptocurrency regulation gaining traction, Indian policymakers seem to be reevaluating their strategies. This reassessment comes amid worries that a lack of clear regulations could hinder India’s progress in the realms of cryptocurrency and Web3 technology. Although the recent Budget 2025 did not provide any direct benefits to the sector, the long-awaited discussion paper on revised regulations, which has been pending since September, hints at possible advancements, according to local crypto exchanges.
Government’s Response to Global Trends
Vikram Subburaj, CEO of Giottus, noted that the government’s reconsideration of crypto policies indicates a readiness to adapt to international developments and broader economic trends. He emphasized that this reflects a growing awareness that India risks falling behind in establishing itself as a leader in the crypto and Web3 sectors if it fails to implement robust regulations designed to protect investors and spur innovation.
Shifts in the Global Regulatory Landscape
India’s decision to review its crypto framework aligns with recent regulatory shifts in the United States, where President Donald Trump has initiated executive actions to foster crypto adoption. This includes creating a presidential working group focused on developing a national regulatory framework for digital assets. Sumit Gupta, co-founder of CoinDCX, expressed optimism about the Department of Economic Affairs’ recognition of global regulatory changes in crypto, particularly concerning international remittances. However, Gupta pointed out that despite discussions at the G20 level, India has yet to adopt a definitive regulatory stance, unlike other major economies that have already implemented their frameworks.
Comparative Progress Among Major Economies
Gupta cited examples of regulatory progress in other nations: the European Union has enacted MiCAR, South Korea has introduced the VAUPA (Virtual Asset User Protection Act), Hong Kong has established new licensing requirements, and China has rolled out anti-money laundering regulations for cryptocurrencies. Additionally, countries like Brazil, Turkey, and the UK have also introduced comprehensive regulations. He highlighted that India stands out as the only major economy that has not yet made significant strides in this area, emphasizing the need for timely regulatory action given the rapidly evolving nature of the crypto industry.
India’s Leading Position in Crypto Adoption
Notably, India has emerged as a leader in global cryptocurrency adoption for the second consecutive year. Between June 2023 and July 2024, the nation ranked highly in the use of both centralized exchanges and decentralized finance platforms. This context underscores the importance of reassessing crypto regulations moving forward.
Potential Future Shifts in Government Stance
Sathvik Vishwanath, co-founder and CEO of Unocoin, expressed the belief that the government may gradually reconsider its position as the global crypto landscape continues to expand. He noted that while the current approach is cautious, sustained advocacy for clearer regulations and improved tax frameworks could catalyze a change. Striking a balance between encouraging innovation and safeguarding investors will be crucial as discussions around crypto intensify.
Increased Compliance Requirements
In the meantime, the government has tightened compliance obligations for cryptocurrency operations. Finance Minister Nirmala Sitharaman proposed amendments to the Income Tax Act, requiring entities such as crypto exchanges to disclose transaction details related to digital assets. Additionally, she suggested incorporating the term “virtual digital asset” (VDA) into the definition of undisclosed income within the block period.
Concerns Over Regulatory Burden
Sonu Jain, Chief Risk and Compliance Officer at 9Point Capital, stated that the proposed amendments, particularly the requirement for exchanges to report all crypto trading activity under section 285BAA, align with the OECD’s Common Approach to Reporting Framework (CARF) aimed at combating global tax evasion linked to digital assets. However, Thangapandi Durai, CEO of Koinpark, raised concerns that treating all crypto holdings as undisclosed income—without differentiating between active traders, long-term investors, and casual users—creates an excessive regulatory burden. He warned that high tax rates and stringent reporting requirements could lead to a capital flight to foreign exchanges, ultimately diminishing liquidity in the domestic market.
Hope for a Clearer Regulatory Path
Despite the challenges, India’s crypto industry remains optimistic that a more defined regulatory framework will emerge, promoting innovation while ensuring investor protection. Nevertheless, industry stakeholders continue to advocate for prompt and decisive actions to prevent India from lagging in the swiftly changing global digital asset environment.
