India Holds Firm on Crypto Regulations, Denies ETF Approval

India Holds Firm on Crypto Regulations, Declines ETF Approval Amid Global Shift

In a decisive move that has drawn both domestic and international attention, India's Finance Ministry has reaffirmed its position on cryptocurrency regulations, making it clear that no reforms or relaxations will be made in the near future. Additionally, the ministry confirmed that the approval of any cryptocurrency exchange-traded funds (ETFs) remains off the table for now.

The decision comes despite rising demand from investors and ongoing global momentum in crypto adoption, particularly in the United States and parts of Asia. With this firm stance, India continues to follow a cautious and heavily regulated path, preserving its 2022 tax framework and signaling continued skepticism toward digital assets.

No Tax Relief, No ETF Green Light

According to a recent official statement, the Finance Ministry has no intention of modifying the existing tax structure governing Virtual Digital Assets (VDAs). Under the current policy, VDAs—such as Bitcoin, Ethereum, and other cryptocurrencies—are subject to a flat 30% tax on profits. In addition, a 1% Tax Deducted at Source (TDS) is applied on crypto transactions exceeding ₹10,000.

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This tax regime, introduced in the 2022 Union Budget, was designed to bring more accountability and traceability to digital asset transactions. The ministry also mandated that companies disclosing any exposure to cryptocurrencies must report such holdings in their audited financial statements. Since the inception of this framework, India has generated approximately ₹700 crore (roughly $84 million USD) in tax revenue from the crypto sector.

Despite these developments, Indian authorities maintain that the digital asset sector remains unregulated. The government has not established a legal framework for the regulation or recognition of cryptocurrencies, nor has it conducted any extensive studies on the long-term impact or utility of these assets in the national economy.

A Conservative Strategy in a Rapidly Evolving Space

India's hesitance stands in contrast to a growing list of countries that have embraced cryptocurrency innovation as part of their economic transformation agendas. The United States, for example, has approved multiple Bitcoin ETFs, making crypto more accessible to institutional investors. Meanwhile, Bhutan and other smaller economies are leveraging blockchain and crypto to drive financial inclusion and attract foreign investment.

By contrast, Indian policymakers, led by Finance Minister Nirmala Sitharaman, continue to prioritize financial stability and risk containment over rapid adoption. Since 2019, Sitharaman has consistently advocated for strict regulation, citing the volatility of crypto markets and the risks posed to retail investors as key concerns.

Officials argue that the introduction of ETFs in India could encourage wider participation in a highly speculative and unpredictable market, potentially leading to financial losses among unsophisticated investors. Furthermore, without a robust regulatory infrastructure in place, ETFs could introduce systemic risks to the broader financial ecosystem.

The Unfinished Business of Crypto Regulation

At the heart of India's cautious stance lies an ongoing regulatory void. Although the country has outlined tax policies for VDAs, it has yet to define clear rules for their use, trading, or classification. There is also no clarity on how decentralized finance (DeFi), stablecoins, or Web3 applications will be treated under existing financial laws.

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Legal experts and industry insiders argue that without a dedicated framework, India risks stifling innovation and pushing crypto entrepreneurs and investors to jurisdictions with more progressive policies. Several Indian startups have already relocated operations to countries like Singapore and Dubai, where legal certainty and lower taxes create more favorable conditions for growth.

Missed Opportunities in a Booming Market

India’s digital asset market is valued at approximately $6.4 billion and growing steadily. With over 20 million crypto users and a highly active developer community, the country has the potential to become a leading global hub for blockchain innovation. However, industry leaders warn that the government’s reluctance to modernize its policies may hinder the market’s full potential.

“If India adopted crypto-friendly regulations and approved ETFs, we could see exponential growth,” said Arun Yadav, a blockchain consultant based in Bengaluru. “It would bring in institutional capital, create jobs, and encourage more responsible innovation.”

Analysts also point to the potential for financial inclusion. Digital assets could serve unbanked populations, enable cross-border remittances at lower costs, and integrate informal economic participants into the formal system.

Industry Frustration Grows

For now, however, industry players and investors must contend with a burdensome regulatory environment. The high tax rate and TDS provisions have significantly reduced trading volumes on local exchanges. Retail investors feel penalized, while institutional players remain largely sidelined due to the lack of legal and regulatory certainty.

“The 30% tax and 1% TDS is unsustainable,” said Priya Mehta, a crypto trader in Mumbai. “It cuts into our profits and discourages regular trading. Without ETF approval, we also don’t have a safe way to diversify our holdings.”

Foreign investor interest has also waned. Global funds seeking exposure to Indian crypto markets are now forced to invest via offshore structures or abstain altogether. This further reduces capital inflows and slows down the sector's evolution.

Global Pressure Mounts

While India remains cautious, international developments are accelerating. In the U.S., the Securities and Exchange Commission (SEC) has recently approved Ethereum ETFs, opening the door to broader adoption. In Europe, MiCA (Markets in Crypto-Assets) regulation has created a unified framework for crypto across the EU. Meanwhile, countries in Asia-Pacific are actively piloting central bank digital currencies (CBDCs) and blockchain infrastructure for trade, healthcare, and public services.

This global shift may put additional pressure on Indian policymakers to revisit their stance. Critics argue that India’s conservative posture, while understandable from a risk perspective, may prove to be strategically shortsighted in the long run.

What the Future May Hold

The crypto landscape in India is at a turning point. With no immediate changes in policy, the industry continues to face challenges. Yet, as more countries adopt comprehensive crypto laws and frameworks, India may find itself forced to act.

Observers believe that community pressure, market lobbying, and global competitiveness will eventually compel the government to soften its approach. Already, several think tanks and industry associations have submitted policy proposals to the Finance Ministry, calling for reduced taxes, clearer definitions, and the establishment of a dedicated crypto regulatory body.

The next few years will likely determine whether India can bridge the gap between innovation and regulation or continue down a path that sidelines one of the most dynamic sectors of the digital economy.

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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