India is leading the world in crypto adaptation. According to Chainalysis, one crypto research firm, India ranked first in the 2024 Global Adoption Index for the second time, despite its high taxation and unregulated crypto policies. However, India is gradually progressing toward a reassessment to produce crypto regulations. But will this open a new horizon or impose bans on crypto exchange and trading?
The Indian government hasn’t yet produced any rules to regulate cryptocurrencies. However, since they were introduced, the journey of cryptocurrencies in India hasn’t been at all smooth. The stance that India has taken toward crypto has always been unfriendly.
In the beginning, it was the Reserve Bank of India, which took the initiative to take a stand against cryptocurrencies. In 2018, RBI banned providing crypto services for business or any other work. Fortunately, in 2020, the Supreme Court abolished this prohibition and legalized crypto-related transactions.
The 2021 crypto bill that was placed in the Lok Sabha proposed to prohibit all private cryptocurrencies and create a Central Bank Digital Currency, approved by RBI. It further elaborated that individuals who violated the crypto ban could be arrested without any warrant. Anyway, the bill was postponed and hasn’t yet passed.
Finally, in 2023, the Financial Intelligence Unit, the anti-money laundering watchdog of India, issued a show cause notice to several crypto companies, including Binance, Kraken, KuCoin, and Bitfinex, for operating crypto exchanges illegally in India. According to it, crypto exchanges are not valid in the laws of AML.
Last but not least, crypto taxation is huge in India. While in the US and UK, the crypto taxes vary between 0% and 20%, India imposes a flat 30% capital gains tax on crypto transactions.
Since Donald Trump has been elected as the President of the U.S. for the second time and he mentioned his vision of establishing a Strategic Bitcoin Reserve, the trend is now shifting toward cryptocurrencies. As a result, multiple nations are reassessing their crypto regulations; basically, they are reevaluating their stance on these digital assets. Amidst this shifting trend, India is also joining other countries in forming crypto regulations.
About adopting new regulations India’s Economic Affairs Secretary Ajay Seth has stated that digital assets are no longer a nation’s property. It has crossed international borders, so India can’t provide individual policies.
India’s finance minister, Nirmala Sitharaman, repeated these same words in one of her interviews, where she said, “Bringing a regulation just within one country without a global understanding on a technology that does not break any borders is not going to help.” So, per her plans, she would like to “go through the route of global understanding” to provide crypto regulations for the nation.
It looks like India won’t really go for some unrealistic crypto regulations, as the finance ministry is analyzing this thing seriously to match the global market.
India’s history with cryptocurrencies isn’t at all great. Therefore, tracking the ups and downs, it is kind of normal for civilians to think that a ban is approaching. Well, that doesn’t seem to be the case. At least the words from the finance minister indicate that.
This crypto regulation re-evaluation has postponed the release of a discussion paper, which was previously scheduled for September 2024. About the delay in reassessing the discussion paper, Ajay Seth revealed, “More than one or two jurisdictions have changed their stance towards cryptocurrency in terms of usage, their acceptance, where do they see the importance of crypto assets. In that stride, we are having a look at the discussion paper once again.”
It's still unclear what exactly will come, but India has always been strict with crypto, and probably things will remain strict with properly defined regulations. One thing is certain: this reassessment will mark a new chapter in the country’s stance toward crypto and reshape the country’s digital asset landscape.
Despite there being hardly any chance of a complete ban, the newly formed regulations may or may not be favorable. If they suit the choices of Indian people and investors, adaptation will increase, investment will get a boost, and innovations will speed up. Otherwise, industry growth and business push will be further slowed down.