India’s Crypto Showdown: FIU & CBDT Turn Up the Heat as Regulation Debate Explodes

India Crypto Regulation in Focus as Parliament Reviews VDA Risks and Policy Direction

India’s cryptocurrency policy is once again under the spotlight as lawmakers, tax authorities, and financial intelligence agencies intensify discussions around the future of digital assets. With crypto trading already taxed but still lacking a unified regulatory framework, the Indian government appears to be moving closer to a decisive policy direction on Virtual Digital Assets (VDAs).

A recent high-level parliamentary meeting signals growing urgency within the government to address enforcement gaps, investor protection, and alignment with global crypto regulations, as India remains one of the world’s fastest-growing crypto markets.

Parliamentary Panel Reviews India’s Crypto Landscape

On January 7, 2026, the Parliamentary Standing Committee on Finance convened a nearly three-hour meeting to review the risks, enforcement mechanisms, and future roadmap for cryptocurrencies in India. The committee is chaired by Bhartruhari Mahtab, a senior Member of Parliament from the Biju Janata Dal (BJD).

Source: Lok Sabha Official

Officials from two key agencies, the Financial Intelligence Unit–India (FIU-IND) and the Central Board of Direct Taxes (CBDT), briefed lawmakers under the agenda titled “Study on Virtual Digital Assets (VDAs) and the Way Forward.”

This was the third formal meeting of the committee dedicated to cryptocurrency issues, highlighting sustained concern within Parliament about the rapid expansion of digital asset activity in the country.

Chairperson Mahtab stated that the committee examined the present status of crypto usage in India, the risks associated with VDAs, and the possible regulatory frameworks that could be adopted. He emphasized that discussions are still at an early and exploratory stage, with more consultations expected in the coming months.

Key Findings Presented to Parliament

During the briefing, government agencies outlined several critical developments related to crypto enforcement, taxation, and financial crime detection.

The CBDT informed the committee that authorities are actively tracking cryptocurrency-linked fraud, particularly cases involving the conversion of illicit income into digital assets. Officials disclosed that some individuals have used cryptocurrencies to move funds overseas, effectively parking undisclosed income beyond India’s traditional financial system.

According to data shared with Parliament, the CBDT has identified approximately ₹888.82 crore (around $108 million) in undisclosed income related to VDA transactions. In response, tax authorities have issued notices and communications to more than 44,000 taxpayers suspected of non-compliance.

The CBDT emphasized that cryptocurrencies are now firmly within India’s tax surveillance framework, with advanced monitoring tools being used to trace suspicious transactions both domestically and internationally.

Meanwhile, FIU-IND highlighted its role under the Prevention of Money Laundering Act (PMLA). As of January 2026, 49 cryptocurrency exchanges have registered with FIU-IND, bringing them under anti-money laundering and counter-terrorism financing compliance requirements.

Regulation Versus Ban: India’s Policy Dilemma

A recurring theme during the parliamentary discussion was the ongoing contradiction in India’s crypto stance.

While the Reserve Bank of India does not recognize cryptocurrencies as legal tender, trading in digital assets remains legal and heavily taxed. India currently imposes a flat 30 percent tax on crypto gains, along with a 1 percent Tax Deducted at Source (TDS) on every transaction.

Source: RBI Official Release

Several lawmakers acknowledged that this dual approach has created confusion among investors, startups, and financial institutions. Cryptocurrency is neither banned outright nor governed by a comprehensive regulatory law, leaving the industry in a gray zone.

Opposition members of the committee pointed out that such ambiguity could discourage innovation while pushing users toward offshore platforms that operate beyond Indian regulatory reach.

Despite these challenges, India continues to rank among the largest crypto markets globally. The country recorded an estimated 119 million crypto users in 2025, and adoption is projected to exceed 123 million by the end of 2026. Usage remains particularly strong among younger investors, residents of smaller cities, and individuals using crypto for cross-border transfers.

Industry Voices Call for Clear Rules

Industry leaders argue that regulatory clarity, rather than punitive taxation alone, could unlock the next phase of growth in India’s crypto ecosystem.

In previous interviews cited by hokanews, regional executives from major global exchanges have stressed that clear and consistent regulations would encourage institutional participation, strengthen domestic exchanges, and reduce dependence on offshore trading platforms.

Source: Chainalysis

Experts believe that a well-defined regulatory framework could also improve compliance, consumer protection, and transparency while enabling India to retain innovation and talent within its borders.

Global Crypto Regulation Trends Influence India

India’s ongoing discussions are taking place against the backdrop of rapid regulatory evolution worldwide. Many major economies have shifted away from blanket bans toward structured regulation.

The European Union has implemented the Markets in Crypto-Assets (MiCA) framework, covering exchanges, stablecoins, and crypto service providers. The United States is advancing stablecoin-focused legislation and innovation-friendly oversight. Singapore and Hong Kong continue to operate as regulated crypto hubs, while the United Arab Emirates has introduced a harmonized framework to attract blockchain businesses.

Brazil is preparing to roll out a new Virtual Asset Service Provider authorization regime in February 2026, while China remains an outlier with a strict crypto ban paired with the promotion of its central bank digital currency.

These global developments were cited during parliamentary discussions as reference points for India’s own policy considerations.

What Comes Next for India Crypto Regulation?

The January 7 meeting suggests that India is leaning toward regulation rather than prohibition, while maintaining strict oversight against tax evasion, fraud, and money laundering.

Beyond Parliament, engagement between policymakers and the private sector is also intensifying. This week, the Bharat Web3 Association met with the Finance Ministry to present its pre-Budget 2026 recommendations, which include proposed relief on TDS, the ability to offset losses, and improved banking access for crypto businesses.

Such consultations indicate that the government may be preparing the groundwork for broader reforms as digital asset adoption continues to expand.

For now, cryptocurrencies in India remain legal, taxable, and closely monitored, but without a dedicated regulatory law. As global standards mature and domestic usage grows, analysts expect India to announce a clearer and more comprehensive crypto policy in the near future.

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