To
explore regulatory measures for cryptocurrencies, we must first understand what
cryptocurrencies are. In simple terms, cryptocurrencies, with Bitcoin as a
primary example, are a form of digital currency that uses encryption and is
decentralised, thereby meaning that it is not issued or under the control of
banks. Cryptocurrencies are growing in popularity now more than ever as the
newly elected president of The United States announced on 17th of
January 2025 that he had launched the $TRUMP memecoin worth billions already,
and shortly after, on 20th of January 2025, the First Lady launched $MELANIA
memecoin.
The
concept of cryptocurrencies uses blockchain technology, which is a result of the
2008 financial crisis that begged for an answer to the problem of digital
transactions without the need for a central authority.[1] In India, though,
cryptocurrencies are not considered illegal; they are also not recognised as
legal tender. Seeing as there are strides being made in India to regulate
cryptocurrencies, especially by preparing papers and conducting research to
further cause actual enactment and change, there is hope for this to be implemented
in the Union Budget 2025.
The
major regulations we have previously had include:-
- There is a 30% tax levied on any profits
one makes from selling crypto for INR, which is taxed at a flat 30% rate, as
well as an additional 1% TDS that will be deducted.
- The Reserve Bank of India (RBI) banned
crypto transactions in 2018 due to concerns over investor protection, lack of
centralisation, and a doorway for illegal activities using crypto. However,
this was overturned in 2020 by the Supreme Court.[2] And,
- Introduction and implementation of Central
Bank Digital Currency (CBDC) by the RBI in 2022, which indicated a shift in
efforts to provide legislation and authenticity to digital currency use in a
regulated manner.
- There is currently a Bill introduced in
2021 called the Cryptocurrency and Regulation of Official Digital Currency
Bill, which shows the Indian government’s concerns regarding legalising crypto
as it aims to ban all forms of cryptocurrencies. However, this bill has yet to be passed but is more than likely to be withdrawn or modified, considering the
current strides being made to recognise crypto in India.[3]
As
per reports[4],
India has adopted the most Virtual Digital Assets (VDAs) among all countries.
Global regulatory frameworks have been adopted in the UK, Europe, the USA, and
Japan. India can take note and follow some of these regulations to fully use
their potential in this industry. Some of these regulations include:-
- United Kingdom: In 2026, the FCA (which already regulates consumer credit in Britain) will oversee cryptocurrencies. This includes not only stablecoins and crypto wallet services or trade platforms, but also wider consumer issues like custody of cryptographic keys, trading rules for digital currencies not regulated by regulators, as well as money laundering prevention. It is anticipated that there will be new consultation papers covering these in due course.
- Europe: Markets in Crypto-Assets (MiCA) went into effect for asset-referenced tokens (ART) and Electronic Money Token (EMT) issuers on 30 June 2024 and for CASPs on 30 December 2024, with detailed rules mandating stablecoin reserves with Central Bank supervision and compliance with anti-money laundering (AML) / combatting financing of terrorism (CFT) regulations.
- United States of America: The Howey Test has resulted in numerous enforcement actions by the SEC over the recent years against projects that the SEC has classified as security, which culminated with the well-publicized Ripple Labs lawsuit. The 119th Congress can bring one voice to crypto policy.
- Japan: In November 2024, Japan's FSA proposed a new regulatory category for crypto intermediaries, which would provide for lighter regulations for crypto brokerage businesses relative to digital asset exchanges.[5]
It
must be noted that there is potential for misuse and crime. VDA service providers
can come under the umbrella of money laundering and financing of terrorism,
which had been highlighted under the provisions of the Prevention of Money
Laundering Act (PML) Act, 2002, in March 2023.[6] There
are also several risks in investing in cryptocurrency, including security, insurance fraud, and market and regulatory risks.[7] Therefore,
the need for regulations can not only provide investors security but allow for
cross-border payments, high return potential, etc.
What
can India do to regulate:-
1. The
definition of VDASP is currently too broad. As per the March 7th,
2023 notification, the same rules apply to all VDA service providers, like SaaS
companies and tech providers. These are not as much of a risk for the likes of
money laundering. Following a risk regulation model such as Japan’s can provide
for innovation and safer investments.
2. The March 10th, 2023 guidelines require the investors’ verification with the use of Aadhaar and biometrics, which does not suit the digital sector. The Reserve Bank of India suggests other forms of Know Your Customer (KYC) methods that are currently used by some VDASPs. Therefore, clear guidance from FIU-IND can make it possible for more user-friendly digital verification methods such as video-based KYC (V-CIP), OTP-based verification, or digital signature authentication.
3. There
are currently no dedicated crypto regulation regulators established in India. Self-regulatory
bodies can take over until a dedicated regulator is established. Examples like
FIU-IND leading initiatives for registration and standards being set by Bharat
Web3 Association are a good way forward in laying the roots.[8]
In
conclusion, some of the future steps that can be taken are by following the
examples of Australia and South Korea, which have commenced regulating crypto
that gives legal clarity and legitimisation, especially for countries like
India, where the population is large, and there is a growing number of
investors who need to take advantage of the crypto scene with little or
controlled risks.
[1] https://farmonaut.com/blogs/the-future-of-cryptocurrency-navigating-indias-regulatory-landscape-and-global-adoption-trends/
[2] Internet
and Mobile Association of India v Reserve Bank of India (2020 SCC Online SC
275).
[3] https://sumsub.com/blog/cryptocurrency-in-india/
[4] https://www.elliptic.co/resources/global-crypto-regulation-landscape-2024
[5] https://corporate.cyrilamarchandblogs.com/2025/01/fig-paper-no-40-vda-series-4-global-crypto-developments-lessons-for-indias-regulatory-regime-in-2025/
[6] https://www.financialexpress.com/budget/budget-2025-crypto-industry-seeks-big-moves-around-regulations-taxes-web3-3716099/
[7] https://www.investopedia.com/terms/b/bitcoin.asp#toc-how-to-buy-bitcoin
[8] https://corporate.cyrilamarchandblogs.com/2025/01/fig-paper-no-40-vda-series-4-global-crypto-developments-lessons-for-indias-regulatory-regime-in-2025/
