India Resists Comprehensive Crypto Regulation Over Systemic Risk Fears

Nov 14, 2025

2 min read

India Resists Comprehensive Crypto Regulation Over Systemic Risk Fears — Unsplash - littlej1428

A government document prepared in September 2025 and seen by Reuters reveals that India does not intend to create a full legislative framework for regulating cryptocurrencies, opting instead to maintain its current partial oversight approach. The document states that regulating crypto would grant the sector legitimacy and could cause it to become systemic, reflecting the Reserve Bank of India's long-held view that containing the risks of cryptocurrencies through regulation would be difficult in practice.

Since 2022, India has imposed a 30% flat tax on gains from virtual digital assets alongside a 1% tax deducted at source on all transactions above 10,000 rupees, a regime that may have led to a loss of approximately $1.2 trillion in trade volume on domestic exchanges according to the Esya Centre, an Indian policy think tank. In March 2023, crypto service providers were designated as obliged entities under the Prevention of Money Laundering Act with the Financial Intelligence Unit-India as the regulator, which in June 2024 imposed a penalty of ₹18.82 crore on Binance for compliance violations. The government document estimates Indian crypto investments at $4.5 billion and considers this neither significant nor a systemic risk to financial stability. Despite this restrictive environment, India retained the top position in the Chainalysis 2025 Global Crypto Adoption Index for the second consecutive year, while on-chain transaction volume in the Asia-Pacific region surged 69% year-on-year to $2.36 trillion. Independent fintech expert Srinath Sridharan argued that the RBI should enforce its stance on crypto risks rather than relying on the weak argument that a ban is unenforceable.

India's current approach amounts to a combination of containment and regulation, aligning with one of the three options outlined by the Bank for International Settlements in early 2023: banning, containing, or regulating crypto activities. The government document warns that widespread stablecoin use could fragment national payment systems and weaken the Unified Payment Interface, particularly as the United States signed the GENIUS Act into law on 18 July 2025 to regulate dollar-backed stablecoins. A Mudrex survey of over 9,000 Indian investors found that 93% support the introduction of crypto regulation, while 84% consider the current tax structure unfair compared to traditional asset classes.

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