India appears to be on the cusp of reevaluating its regulatory framework for cryptocurrencies, a move that reflects a broader global trend toward more favorable positions on digital assets. International sentiments, especially those emerging from the United States, have shifted to embrace pro-crypto policies. As these dynamics evolve, it has become increasingly apparent that India’s existing approach may require adjustments to align with a more progressive narrative. Reports suggest that Ajay Seth, the Economic Affairs Secretary, is spearheading this reassessment, recognizing the critical changes in other jurisdictions that might inform India’s next steps.
The push for a more accommodating cryptocurrency ecosystem in India has garnered support from industry leaders who perceive this potential policy shift as a positive stride toward modernization. Sumit Gupta, co-founder of CoinDCX, highlighted India’s grassroots movements in crypto adoption, suggesting that the country is well-positioned to harness the benefits of the Web3 economy. His optimistic projections show that Web3 technology could contribute significantly to India’s GDP, pushing it towards the ambitious goal of becoming a trillion-dollar economy. Gupta urges the government to implement friendly regulations and release a discussion paper to prioritize clear guidance, which, in turn, would pave the way for innovative growth in the sector.
The Disconnect: Taxation and Compliance
Ironically, as the government contemplates improving its regulatory stance, the recently introduced Budget 2025 includes stricter tax measures for cryptocurrencies. These new regulations categorize digital currencies as virtual assets and impose notably high tax penalties for undeclared earnings—up to 70% retroactively applied to four years of undeclared gains. Furthermore, businesses will bear the burden of increased compliance demands, needing to report every transaction by April 2026. This Draconian tax framework poses risks, potentially funneling participants into unregulated markets that are far tougher to oversee.
Experts like Gupta voice strong concerns over how crippling tax structures could push Indian crypto traders onto offshore platforms or into the shadow economy, creating a gap in oversight and compliance that could threaten the sector’s integrity.
For India’s aspirations of achieving a $30 trillion economy by 2047, a delicate balance must be struck between regulation and innovation. Gupta argues that fostering a thriving blockchain and AI ecosystem—alongside supportive crypto policies—is essential. Strikingly, he suggests that a modest 0.01% TDS rate more aligned with industry norms, along with provisions to offset trading losses, would not only promote compliance but could also enhance revenue for the government.
India’s approach to cryptocurrency regulation stands at a pivotal juncture. While there is a commendable effort to adopt a more considerate stance, the simultaneous enforcement of strict tax policies could undercut the intended progress. The nation must distinguish between regulation that supports innovation and that which stifles it, setting the stage for a more sustainable and vibrant digital economy in the years to come.
