India is reassessing its stringent stance on cryptocurrencies in light of evolving global perspectives, particularly following recent crypto-friendly policy announcements by U.S. President Donald Trump. According to a Reuters report on February 2, Economic Affairs Secretary Ajay Seth emphasized that India’s stance cannot be unilateral as crypto assets “don’t believe in borders.”
“More than one or two jurisdictions have changed their stance towards cryptocurrency in terms of the usage, their acceptance, where do they see the importance of crypto assets. In that stride, we are having a look at the discussion paper once again,” Seth told Reuters.
Despite stringent regulations and high trading taxes, the call for reassessment also assumes significance as India has led the global adoption of cryptocurrencies for the second consecutive year. From June 2023 to July 2024, the country ranked high in the usage of both centralized exchange and decentralized finance assets.
Importantly, India was expected to release a discussion paper outlining its regulatory stance on crypto in September last year following discussions with different stakeholders including the Reserve Bank of India (RBI), and the markets regulator SEBI.
Relooking at crypto rules may further delay the release of the discussion paper.
India’s regulatory journey with cryptocurrencies has so far been complex. In 2018, the country’s central bank Reserve Bank of India (RBI) had imposed a ban on entities it regulates from dealing in cryptocurrencies. The ban, however, was lifted by the Supreme Court of India in March 2020, allowing cryptocurrency trading to resume.
In December 2023, the Financial Intelligence Unit issued show-cause notices to nine offshore crypto platforms for non-compliance with local regulations. Moreover, the world’s largest crypto exchange Binance was fined Rs 18.82 crore in June 2024 for violating India’s anti-money laundering rules.
Alongside monitoring crypto activities in the country, the RBI has been exploring the development of a Central Bank Digital Currency (CBDC), known as the Digital Rupee. Pilot projects for both wholesale and retail segments were launched in late 2022, aiming to modernize the financial system and offer a regulated digital currency alternative.
Meanwhile, the government has tightened the compliance requirements around crypto. Finance Minister Nirmala Sitharaman in this year’s budget proposed amending the Income Tax Act for entities including crypto exchanges to disclose transaction details related to crypto assets. The minister also proposed adding the term “virtual digital asset” (VDA) to the definition of undisclosed income of the block period.