Crypto regulation India Delay Raises Concerns Amid Global Moves

Crypto Regulation in India: Silence from Government Raises Global Concerns

As global cryptocurrency markets mature and countries like the U.S., Japan, and Singapore push ahead with strong regulatory frameworks, India remains eerily silent. Despite collecting taxes and enforcing platform registrations, the Indian government has yet to clarify the legal status of cryptocurrencies within its borders, creating uncertainty for investors, developers, and the broader Web3 ecosystem.

The issue of crypto regulation in India has become a source of increasing debate. A recent post by Bitcoin enthusiast and software engineer Sapna Singh on social media has reignited public scrutiny. She directly questioned the Minister of State for Finance, Pankaj Chaudhary, about the lack of clarity and the absence of official data collection despite years of deliberation.

Still Unregulated, Yet Taxed

India's Finance Ministry has confirmed that cryptocurrencies remain unregulated. Yet, exchanges and service providers operating within India are required to register with the Financial Intelligence Unit of India (FIU-IND). Failure to comply results in penalties or blacklisting. This hybrid stance—where cryptocurrencies are neither legal nor illegal—leaves the ecosystem in a regulatory grey area.

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Despite the lack of a legal framework, the government imposes a hefty 30% capital gains tax on crypto profits and a 1% Tax Deducted at Source (TDS) on every transaction. Many view this as a contradiction, suggesting that the government is eager to benefit financially while avoiding the responsibilities of clear policymaking.

Why Has There Been No Progress?

India’s hesitancy to create and implement a crypto policy stems from several underlying factors:

• Lack of Clear Legislative Path: The absence of a dedicated virtual asset law makes it difficult for regulatory bodies to act cohesively. This vacuum allows departments to sidestep responsibility, as there's no specific mandate.

• Revenue-Focused Approach: Critics argue that the government is more focused on tax revenue than investor welfare. With high taxes and no investor protection, the policy seems designed to extract value without delivering support.

• Decentralization Aversion: A deep-rooted skepticism toward decentralized financial systems may also be contributing to the delay. By not fully endorsing decentralized currencies, the government keeps a safe distance while still collecting taxes.

• Wait-and-Watch Strategy: With countries around the world still adjusting their policies, India may be waiting to see which frameworks succeed before committing to its own. But this passive approach may cost the country in the long term.

The Global Race and India’s Position

While India delays, other nations are taking bold steps. The U.S. has approved Bitcoin and Ethereum ETFs, Japan has opened its doors to blockchain innovation, and Singapore continues to attract crypto firms with clear policies. Even Pakistan has drafted its initial framework for digital assets, signaling a growing regional interest.

India, despite its strong technological and financial infrastructure, remains behind. Without a formal policy, investors face confusion, startups struggle to raise capital, and innovation slows.

As the world rapidly shifts toward decentralized finance, India’s lack of regulation could mean missing out on a trillion-dollar opportunity.

The Data Deficit: A 5-Year Policy Stalemate

One of the most troubling aspects of India’s approach is the lack of data. For five years, the government has promised a framework. Yet, to date, there is no public record of how cryptocurrency is being used within the country. This lack of data hinders smart policy-making and undermines trust in the system.

"Without reliable data, how can we expect effective rules? The silence is costing us opportunities," says Singh, echoing the frustration of thousands of crypto stakeholders in India.

Is India Losing Ground to Pakistan?

The irony is stark. India, often seen as a global tech leader, is now lagging behind countries with far fewer resources. Pakistan, once considered a digital underdog, is exploring blockchain integration and working toward a national digital asset policy.

If India continues its hesitant stance, it risks falling behind not just in adoption but in leadership and innovation as well. It could soon become a spectator in a space it once had the potential to dominate.

A Clear Policy Could Unlock Huge Potential

India's middle class, known for its digital savviness and risk appetite, could benefit significantly from a robust crypto ecosystem. Clear regulation would provide legitimacy, protect investors, encourage innovation, and attract international capital.

Crypto can also serve as a powerful tool for financial inclusion, enabling borderless transactions, micro-investments, and access to decentralized finance tools for underserved populations.

What Needs to Be Done

Experts suggest the following steps to move forward:

1. Establish a Regulatory Framework: Create a comprehensive bill outlining the legal status of cryptocurrencies, including consumer protection laws and operational guidelines for exchanges.

2. Enable Data Collection: Initiate formal data gathering on crypto usage patterns, investments, and risks. This will support evidence-based policy.

3. Collaborate With Industry Leaders: Engage startups, investors, and developers in roundtable discussions to ensure practical regulations that support innovation.

4. Create Public Awareness: Launch educational campaigns to demystify blockchain and crypto assets among the public.

5. Align With Global Standards: Adapt international best practices while preserving India's regulatory sovereignty.

Conclusion: Time for Action, Not Silence

The decentralized revolution is not waiting for anyone. If India hopes to be a leader in the digital future, the time for ambiguity must end. The government must break its silence, collect actionable data, and build a forward-thinking regulatory environment.

As the fifth-largest economy in the world, India cannot afford to be left behind. The stakes are too high, and the window of opportunity is narrowing.

Writer @Ellena

Ellena is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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