AI, Blockchain, and Crypto Regulation: India’s Next Frontier

COINS Act and Emerging AI and Blockchain Governance in India: Regulatory Debate Intensifies

India, widely recognized as one of the leading nations in cryptocurrency adoption in 2025, is now facing a pivotal moment in the integration of advanced technologies into public governance. Union Minister of Science and Technology Jitendra Singh recently highlighted the increasing role of artificial intelligence (AI), blockchain, and the Internet of Things (IoT) in shaping government services, policy planning, and secure public administration. This development raises questions about the country’s stance on digital assets, the potential impact on innovation, and the balance between regulation and adoption.

AI, Blockchain, and IoT: Transforming Governance

Minister Singh emphasized that AI can enhance government efficiency by predicting trends, informing policy decisions, and facilitating data-driven strategies. Blockchain technology is being positioned as a tool to increase transparency, reduce fraud, and create immutable records for administrative processes. Meanwhile, IoT applications promise improved delivery of public services, exemplified by initiatives such as the Digital Life Certificate system. This system allows seniors to claim pensions without standing in queues or submitting extensive paperwork, underscoring the practical benefits of integrating emerging technologies into governance.

Where Cryptocurrency Regulation Fits In

While India has embraced blockchain for administrative purposes, its approach to cryptocurrencies remains cautious. The COINS Act, a model law proposed by venture firm Hashed Emergent and advisory group Black Dot, seeks to establish a regulatory framework for digital assets in India. This proposal, officially known as the Crypto-systems Oversight, Innovation and Strategy (COINS) Act, recommends the creation of a Crypto Assets Regulatory Authority (CARA) to oversee the sector.

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The COINS Act draws inspiration from Europe’s MiCA regulations and Singapore’s sandbox approach, emphasizing the protection of self-custody rights, safeguarding financial privacy, ensuring permissionless access to protocols, and establishing a strategic Bitcoin reserve. Notably, it suggests funding the reserve partly with assets confiscated through law enforcement operations. However, the model law has no legal standing until Parliament formally adopts it, leaving the future of crypto regulation in India uncertain.

Challenges and Government Reluctance

Despite ranking first globally in crypto adoption, India’s government has approached regulation cautiously. Key concerns include avoiding the legitimization of cryptocurrencies as formal financial assets, which could disrupt the existing monetary framework. Authorities are also wary of stablecoins pegged to foreign currencies like the U.S. dollar, which could undermine the success of India’s Unified Payments Interface (UPI), a cornerstone of its digital payments infrastructure.

Security concerns further complicate regulatory decisions. Cryptocurrencies like Bitcoin, Tron, and USDT have been linked to illicit activities, including terrorism financing, cybercrime, and drug trafficking, often facilitated through VPNs and anonymous accounts. In response, the government has implemented a 30% flat tax on crypto profits and a 1% TDS on transactions exceeding 9,500 rupees. Additionally, all exchanges must now undergo mandatory cybersecurity audits following a surge in cyber theft incidents.

Adoption Outpacing Regulation

Despite regulatory uncertainty and significant taxation, millions of Indians continue to trade and invest in digital assets, demonstrating the country’s commitment to crypto adoption. India’s position as the top global crypto adopter in 2025 highlights a population increasingly engaged with digital financial tools, even amid unclear legal frameworks.

Industry experts argue that the future integration of AI and blockchain in governance could determine whether India becomes a hub for technological innovation or remains constrained by ambiguous regulations. Effective adoption of AI and blockchain can streamline administrative processes, reduce corruption, and improve public service delivery, while clear crypto regulations may foster a more secure and robust investment environment.

Potential Impacts of COINS Act

If implemented, the COINS Act could provide clarity and legal structure for India’s burgeoning digital asset sector. By establishing CARA, the government could oversee and regulate crypto markets more effectively, ensuring compliance, investor protection, and transparency. A formal regulatory framework may also encourage foreign investment, incentivize startups, and strengthen India’s position as a global technology leader.

Moreover, integrating blockchain with governance mechanisms could reinforce trust in public systems. Immutable records, secure digital identities, and AI-assisted policy planning have the potential to reduce bureaucratic inefficiencies and promote accountability. IoT-enabled service delivery, such as the Digital Life Certificate system, illustrates the tangible benefits of technology-driven governance.

Balancing Innovation and Risk

India faces a delicate balancing act: fostering innovation while mitigating risks associated with digital assets. The government’s cautious approach reflects concerns over financial stability, consumer protection, and national security. At the same time, the COINS Act demonstrates industry-driven efforts to establish a structured, forward-looking framework that aligns with international best practices.

Experts suggest that a collaborative approach between policymakers, industry stakeholders, and technology experts will be crucial. Clear regulations, coupled with technological innovation, could propel India to the forefront of digital governance and cryptocurrency adoption.

Conclusion

India stands at a crossroads in 2025, with AI, blockchain, and IoT technologies poised to transform governance while the cryptocurrency sector grows rapidly. The COINS Act offers a blueprint for regulatory clarity, but adoption remains contingent on parliamentary approval. Balancing innovation with security and regulatory oversight will be critical to sustaining India’s position as a global leader in digital assets and technology-driven governance.

As the country navigates this complex landscape, the integration of emerging technologies in governance and the establishment of a legal framework for cryptocurrencies may determine whether India emerges as a hub of innovation or continues to grapple with regulatory ambiguity.

Writer @Erlin

Erlin 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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