Cryptocurrency Regulations In India

Is Cryptocurrency Legal in India in 2025?

The answer to this question is yes, cryptocurrency is legal to hold and trade in India. However, there are some caveats such as the fact that is not accepted as legal tender. The government of India categorizes cryptocurrency as a Virtual Digital Asset (VDA) under the Income Tax Act, and also requires crypto platforms to follow FIU-IND regulations. We will detail the current state of cryptocurrency in India in this post. 

Current Legal Status for Crypto

As we have mentioned in the introduction, you can trade crypto as you wish but you can’t use it as a payment method in India. The Reserve Bank of India discourages the use of cryptocurrencies for payment while encouraging the use of Digital Rupee, which is the Central Bank Digital Currency. 

Trading vs Payment Usage

However, when trading you are only allowed to use it on registered and compliant exchanges. Moreover, it is subject to taxation, which means 30% goes to taxes and 1% TDS on transactions above thresholds. At this point, you are likely aware that it is prohibited in payments due to concerns of anonymity, volatility and lack of customer protection. Thus, the only digital payment method remains as the Digital Rupee (CBDC).

Who Regulates Cryptocurrency in India?

There is more than one single authority that regulates the cryptocurrency landscape in India. There’s Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Ministry of Finance and more. Let’s start with what RBI does. RBI’s responsibilities consist of monitoring systemic risk, opposing payment use and supporting CBDC. SEBI deals with overseeing exchange behavior, token listings and investor protection. On the other hand, Ministry of Finance handles crypto tax rules and AML policy coordination. 

How Is Cryptocurrency Taxed in India?

There is a flat 30% tax on all crypto gains, which encompass all profits from selling, trading or transferring cryptocurrencies regardless of your income or your profession. If the transactions you make exceed ₹50,000 per year, then this makes you subject to 1% Tax Deducted at Source (TDS). You should also note that you cannot offset your losses from crypto trading against other income. However, recent news show that there can be changes in this field. According to The Times of India, the CBDT has been evaluating the impact of current tax policies, 1% TDS rate and loss offsetting. 

Are Crypto Exchanges Regulated in India?

Yes. As of March 2023, all VDA service providers (exchanges, wallets) must register with FIU-IND under the Prevention of Money Laundering Act (PMLA). In fact, India’s requirements are not so different from this in the other countries. 

First, you must register with the FIU-IND in order to operate legally. If you don’t, you may face penalties just like Binance did last year. According to Reuters, Binance failed to properly register with FIU, which resulted in a fine of ₹188.2 million rupees ($2.25 million). Next, conduct Know Your Customer (KYC)/Electronic KYC (eKYC) and Customer Due Diligence (CDD). These help you to verify identity and the risk profile of each user. After this step, you must report every suspicious and unusual transaction to the Financial Intelligence Unit. All of the documents that you’ll gather from these steps must be kept for at least 5 years, such as records of all transactions and KYC data. This is very crucial because these will come in handy in audits and regulatory investigations. You should also conduct regular internal and external audits. These steps will ensure that you have proper monitoring, reporting and risk management. You can reach out to Sanction Scanner to get support regarding full compliance. 

What Is the Role of FIU-IND?

FIU-IND is one of the key regulators for crypto exchanges in India. Let’s go over its responsibilities a bit to help you get a clearer picture. FIU-IND monitors red flags and high-risk transactions, enforces reporting obligations, oversees KYC compliance and prevents terror financing/crypto-enabled fraud. 

How Can Crypto Firms in India Stay Compliant?

If you work at a crypto firm, there are numerous things to do in order to avoid penalties and remain operational. You can do some of these without getting any external help such as registering with FIU-IND, using real-time AML tools, maintaining continuous KYC, logging and analyzing activity. However, you may decide to leverage solutions like Sanction Scanner. We support all of the processes that we have mentioned but also offer PEP screening, sanctions list checks, adverse media monitoring, API integrations for crypto AML and more. 

What Are the Penalties for Non-Compliance With Crypto Laws in India?

As in other parts of the world, firms can receive fines and operational bans if they fail to comply with crypto laws. These operational bans can even come as a permanent suspension. Moreover, FIU-IND can blacklist non-compliant platforms. Being blacklisted means you cannot legally operate in India. The strictness of this situation doesn’t seem likely to change anytime soon because just in 2024, more than 15 exchanges received warnings for failing to adhere to AML/KYC reporting rules. We believe this only signals stricter enforcement in the coming years. 

What Is the Future of Cryptocurrency in India?

While we’ve already concluded the last section with the future of cryptocurrency, let’s expand upon these and see what could be coming. First of all, we do not expect cryptocurrencies’ status as Virtual Digital Asset to change anytime soon. As we have mentioned in the previous part, strictness of KYC/AML regulations, as well as taxation, is likely to rise. We also believe that promotion of the Digital Rupee (CBDC) will continue as the only official and safe digital currency.