India Signals Possible Shift in Crypto Regulations Amid Global Adoption Trends

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The Indian government is re-evaluating its stance on cryptocurrency, influenced by the increasing global adoption of digital assets and regulatory developments in major economies like the United States.

 

Quick Take

  • India is reconsidering its crypto policy as other countries, including the U.S., shift towards greater acceptance of digital assets.

  • The government continues to impose strict crypto taxation, including a 70% penalty on undisclosed gains.

  • The Reserve Bank of India (RBI) is expanding its cross-border payment platform with a focus on CBDCs.

  • India’s regulatory adjustments align with global trends, including the U.S. Internal Revenue Service’s (IRS) new tax reporting rules for crypto.

India’s Potential Policy Shift a Result of International Pro-Crypto Outlook?

Historically, India has been skeptical of cryptocurrencies, enforcing strict regulations to curb their use. However, recent statements from Ajay Seth, the country’s Economic Affairs Secretary, indicate that the government is reassessing its position in response to global trends. Seth acknowledged that cryptocurrencies “don’t believe in borders,” suggesting India may not want to lag in the digital asset revolution.

 

Source: X

 

The potential policy shift follows mounting international acceptance of crypto. Notably, the U.S. government has been exploring regulatory frameworks for digital assets, while other nations, including El Salvador, Canada, and Australia, have adopted friendlier stances.

 

Read more: Crypto Tax in India: Everything You Need to Know

 

India’s Tough Taxes on Crypto, 70% Penalties on Undisclosed Gains

Source: Cointelegraph

 

Despite indications of a policy review, India continues to enforce strict taxation measures on crypto transactions. Under Section 158B of the Income Tax Act, crypto assets fall under the same tax category as traditional assets such as jewelry and bullion. This classification enables the government to impose heavy penalties of up to 70% on previously undisclosed gains. The penalty applies retrospectively for up to four years after the tax assessment year.

 

This crypto taxation approach aligns with the global trend of increasing scrutiny on crypto-related earnings. For instance, the U.S. IRS has introduced a new reporting framework, requiring centralized exchanges (CEXs) and brokers to report digital asset sales and exchanges from 2025 onward.

 

A Favorable Outlook Toward CBDCs and Cross-Border Payment Initiatives

While maintaining a tough stance on cryptocurrencies, India has actively promoted central bank digital currencies (CBDCs). Former RBI Governor Shaktikanta Das described CBDCs as “the future of currency” before stepping down in December 2024.

 

The RBI recently announced plans to expand its cross-border payment platform to include additional trading partners. The initiative aims to leverage wholesale CBDCs as the primary settlement mechanism for international transactions.

 

Enforcement Actions and Tax Collection on Exchanges

India’s regulatory crackdown has also targeted crypto exchanges operating in the country. In December 2024, authorities uncovered over 824 crore INR ($97 million) in unpaid goods and services taxes (GST) from various platforms. Earlier in August 2024, Binance faced demands to settle 722 crore INR ($85 million) in unpaid taxes.

 

Several major Indian exchanges, including WazirX, CoinDCX, and CoinSwitch Kuber, are currently under scrutiny for similar tax compliance issues. Meanwhile, international platforms like Bybit have suspended operations in India due to regulatory pressure.

 

Read more: KuCoin Sets a New Precedent in India: Pioneering FIU Compliance Among Global Crypto Exchanges

 

What’s Next for India’s Crypto Policy?

Although India’s crypto regulatory landscape remains strict, signs of potential change are emerging. With major economies adopting progressive crypto regulations, India faces increasing pressure to revise its approach.

 

Ajay Seth’s recent remarks hint at ongoing discussions within the government regarding the country’s digital asset strategy. However, until new policies are officially enacted, India’s crypto traders and investors will continue to navigate high taxes and strict compliance requirements.

 

As the global crypto ecosystem grows, India’s next move could significantly impact the broader market. Whether the country embraces a more balanced regulatory framework or maintains its restrictive approach remains to be seen.

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