India’s Crypto Landscape Reacts to Regulatory Reevaluation
India’s cryptocurrency sector is buzzing with activity as reports emerge that the government is reconsidering its position on digital assets. With global frameworks for cryptocurrency regulation gaining speed, Indian policymakers seem to be taking a fresh look at their strategies. This initiative is driven by fears that India may fall behind in the crypto and Web3 space if robust regulations are not put in place. Although the Budget 2025 did not provide any immediate relief, the ongoing discussions, particularly a paper that has been pending since September of the previous year regarding updated regulations, suggest that advancements may be on the horizon, according to local crypto exchanges.
Government’s Reassessment Signals Responsiveness to Global Trends
Vikram Subburaj, the CEO of Giottus, indicated that the government’s reevaluation of crypto policies demonstrates its readiness to adapt to global developments and macroeconomic shifts. He noted that there is a growing awareness that India risks missing the opportunity to become a leader in crypto and Web3 if it fails to implement strong regulations that safeguard investors and promote innovation.
US Policy Shifts Influence India’s Regulatory Review
The call for a review of India’s cryptocurrency framework follows recent changes in the United States regarding crypto policies, including executive orders from U.S. President Donald Trump that established a presidential working group to create a federal regulatory framework for digital assets. Sumit Gupta, Co-founder of CoinDCX, expressed optimism about the Department of Economic Affairs recognizing international advancements in crypto regulation, especially concerning cross-border remittances. However, he pointed out that, despite discussions at the G20 level, India has yet to adopt a definitive regulatory position, while other significant economies have forged ahead with their frameworks.
Global Comparisons Highlight Regulatory Gaps
Gupta highlighted that various countries, including those in the European Union, South Korea, Hong Kong, and China, have established comprehensive regulations for cryptocurrencies. He noted that nations like Brazil, Turkey, and the UK have also made significant regulatory strides. In essence, every major economy except India has progressed in this area, and Gupta stressed that the rapidly evolving nature of the crypto industry should not be used as an excuse for regulatory stagnation.
India Leads in Cryptocurrency Adoption
Significantly, India has been at the forefront of global cryptocurrency adoption for two consecutive years. From mid-2023 to mid-2024, the nation ranked prominently in the usage of both centralized exchanges and decentralized finance platforms. This context makes the reevaluation of crypto regulations even more crucial.
Potential for Regulatory Evolution Amid Growing Demand
Sathvik Vishwanath, Co-founder and CEO of Unocoin, believes that the government may gradually rethink its position as the global crypto landscape continues to evolve. He emphasized that while the current approach is cautious, a sustained push from the industry for clearer guidelines and improved tax structures could lead to a significant shift. The challenge lies in finding a balance that fosters innovation while ensuring investor protection, which may compel the government to adapt if the demand and discussions surrounding crypto intensify.
Compliance Requirements Tightened
In the meantime, the government has tightened compliance regulations related to cryptocurrency. Finance Minister Nirmala Sitharaman proposed amendments to the Income Tax Act requiring entities, including crypto exchanges, to disclose transaction details involving crypto assets. The proposal also includes the addition of the term “virtual digital asset” (VDA) to the definition of undisclosed income within the block period.
International Cooperation to Combat Tax Evasion
Sonu Jain, Chief Risk and Compliance Officer at 9Point Capital, stated that the proposed amendments, particularly those requiring exchanges to report all crypto trading activities to the government, align with the OECD’s Common Reporting Framework (CARF) aimed at curbing global tax evasion associated with digital assets. Jain elaborated that this information would be shared with all OECD member countries to help tax authorities tackle tax evasion effectively.
Concerns About Overregulation in the Crypto Space
Despite these regulatory developments, Thangapandi Durai, CEO of Koinpark, cautioned against classifying all cryptocurrency holdings as undisclosed income without differentiating between active traders, long-term investors, and casual users. He argued that imposing high taxes and rigorous reporting requirements might drive capital out of India towards foreign exchanges, thereby diminishing liquidity in the domestic markets.
Hope for a Clearer Regulatory Future
Overall, the Indian cryptocurrency industry remains optimistic that a clearer regulatory framework will emerge, promoting innovation while safeguarding investor interests. Nevertheless, industry stakeholders continue to advocate for decisive measures to prevent India from trailing behind in the fast-paced global digital asset arena.
