Legal Crypto In India

Introduction

Cryptocurrencies are legal in India, but there isn't any clear law that defines their legality as of June 2025. They are called virtual currency or digital currency and are not considered as currency or legal tender, but assets issued and circulated by the internet, cryptocurrency based on blockchain, or which are referred with similar names. The regulatory schemes are mainly based on adherence with the AML and CTF laws as well as tax policies which take effect in 2022. The RBI remains wary, emphasizing consumer protection and financial stability, while the government tries to strike a balance between innovation and regulation. This article studies the regulatory practice of virtual currencies, key legislation, and major trading modes, discusses representative trading platforms and the development of the DeFi and NFT markets, and advocates for the cryptocurrency industry to develop in law owing to the identification of legal environment. It contains a table for regulation summaries and practical information for users.

Cryptocurrency Legal Standing

Classification and Oversight

In India, cryptocurrencies such as Bitcoin and Ethereum are referred to as virtual digital assets under the Finan... None of them are termed as commodities, securities or legal tender. They are ‘digital’ units of account, which are not treated as money or currency, but which are accepted as a means of payment in a number of similar types of transaction, which is used as a payment or medium of exchange. Cryptocurrencies are not treated as currency by the RBI but adherence to AML/CTF standards is required since it falls under the PMLA, 2002 regime. CS SEBI does not directly regulate cryptocurrencies, unless they are classified as securities. It is anticipated that the Crypto Assets Governance Bill (the “CAB Bill”), which is planned to be released in mid 2025, and which seeks to regulate the trade of crypto assets in a holistic manner to increase consumer protection and sustainability, will bring South Africa in line with international practices.

Tax and Banking Developments

A major legislative development has been the tax regime effected under the Finance Act 2022 which taxes 30% of income earned from virtual digital assets, including cryptocurrencies, without any threshold of holding of cryptocurrencies, as well as the levy of 1% TDS (tax deducted at source) on transactions exceeding INR 10,000. The measures are intended to follow crypto transactions and uphold tax regulations. There are no tax exemptions or special treatment for long-term hold period, as in certain places. The RBI’s 2018 order banning banks from offering banking services to crypto businesses was overturned by the Supreme Court in 2020, giving crypto companies access to banking services, although some banks have continued to be circumspect. If and when the as-yet-to-be-proposed Crypto Assets Governance Bill arrives in mid-2025, it might deal with the risks of debanking as well as ease banking access for crypto businesses, according to conversations in parliamentary committees and public statements on platforms such as X.

Legislation for the Crypto Market

Prevention of Money Laundering Act (PMLA)

The PMLA, 2002, as modified in 2023, is the basis for India’s crypto regulation, which mandates virtual digital asset service providers (VDASPs) like exchanges and wallet providers to register with the Financial Intelligence Unit-India (FIU-IND) and adhere to know-your-customer (KYC) and transaction monitoring needs. VDASPs should be required to report suspicious transactions to combat illicit financial flows in line with international AML/CTF norms. The same structure applies to both custodial and (where appropriate) non-custodial services.

Finance Act 2022

The 2022 Finance Act proposed a cryptocurrency tax framework, classifying them as virtual digital assets. It requires a 30% tax on income from crypto transactions and a 1% TDS on more than 10,000 Rupees above the transfer. This law is for telling the world of your contribution through Crypto and Cementing Crypto into India’s financial system despite high tax rates have led to heated debates amongst investors as can be read through online discussions.

Bill to Control Sealed Crypto Assets

The Crypto Assets Governance Bill, which is anticipated to be tabled around mid-2025, is intended to create a separate system of regulations for virtual currencies. It is thought to bring in licensing for VDASPs, increase consumer safeguards as well as providing more clarity on the RBI’s oversight of the sector. The bill is based on international models and public consultations, which indicates India’s approach of balancing between promoting innovation and risk management.

Conformity to International Standards

India is regulating crypto in line with the recommendations of the Financial Action Task Force (FATF) and is considering approaches such as the EU’s Markets in Crypto-Assets Regulation (MiCAR). Government engagement in the G20 talks about crypto regulation indicates a willingness to assimilate domestic know in line with global norms, which may in turn affect future legislation.

Regulatory Summary Table

Regulation	Description	Key Requirements	Effective Date
PMLA, 2002 (Amended 2023)	Core regulation for AML/CTF compliance in crypto transactions.	KYC, FIU-IND registration, transaction monitoring, suspicious activity reporting.	2002, amended 2023
Finance Act 2022	Defines cryptocurrencies as virtual digital assets; introduces taxation.	30% tax on profits, 1% TDS on transactions above INR 10,000.	April 2022
Crypto Assets Governance Bill (Proposed)	Aims to provide a comprehensive crypto regulatory framework.	Expected to include licensing, consumer protections, and market stability measures.	Mid-2025 (anticipated)
FATF Alignment	Aligns India’s crypto laws with global AML/CTF standards.	Compliance with international financial transparency standards.	Ongoing

Cryptocurrency Exchanges and Methods

Popular Exchanges

Crypto exchanges are quite popular in India. WazirX WazirX is an Indian trading platform, later acquired by Binance, that allows you trade in INR and provide a nice interface that can be used for buying and selling of major cryptocurrencies such as Bitcoin and Ethereum. CoinDCX offers INR deposits and trading with numerous altcoins along with AML/CTF requirements. Global exchanges like Binance, Kraken and Coinbase are also fan favorites, holding many different coins and following Indian KYC mandates for domestic customers.

Methods of Exchange

Indian users can buy sell cryptocurrencies on a mainstream exchange or INR based deposit/withdrawal in an exchange with the help of bank account transfers (UPI, IMPS, NEFT) and debit/credit visa/master card. P2P platforms such as LocalBitcoins and Paxful enable direct deals between individuals, frequently settling payments with UPI (Unified Payments Interface). Bitcoin ATMs are rare but available in cities including Mumbai, and Delhi where users can make cash or card transactions. For large deals, there are OTC (Over-The- counter) desks in exchanges such as Binance or local brokers that offers discreet trading services to high net-worth individuals.

DeFi Market

Regulation and Operations

DeFi is booming in India, yet no regulation is in place until June 2025. Decentralized protocols such as Uniswap, Aave, and Compound are available, and users can lend, borrow, and farm yield with them. However, DeFi projects that provide custodial services might be subject to AML/CTF regulation in accordance with the PMLA, meaning they must adopt KYC measures. A lack of defined DeFi regulations, as published Indian crypto enthusiast community streams on platforms such as X make way for vulnerabilities in smart contracts and fraud.

Global Influence and Research

The Crypto Assets Governance Bill may tackle DeFi (although indirectly, as part of a larger crypto package), depending on how the FATF adapts its DAC with respect to decentralized platforms. DeFi’s potential for diversification of investment portfolio in a niche market compared to widely available cryptos is pointed by academic research at Indian institutes like IIT Delhi.

NFT Market

Status and Regulation

NFTs are considered digital assets pursuant to the general civil laws in India and there is no specific regulation on NFTs as of June 2025. Artists and collectors in India have used platforms such as OpenSea and Rarible to buy, sell and trade digital art, collectibles and gaming assets. Income Tax (NFTs) The Finance Act 2022 has imposed 30% revenue tax on NFT profits, with no exception for long-term holdings as provided for in certain other jurisdictions. The 2025 bill if passed could contain guidelines specifically applicable for NFTs with a tilt toward intellectual property and protection against fraud.

Risks and Research

Indian research highlights that speculative nature and various risks like intellectual property disputes and market risk about NFTs. The legal community is also stressing the necessity of regulatory clarity to safeguard investors, echoing international fears of NFT fraud and legal ambiguity.

Use-Value of User Information

• Top Indian Exchanges: WazirX (INR-based, AML approved)NO CoinDCX (Easy to use, Numerous coins),Binance / Kraken / Coinbase (International exchanges with Indian compliance)
• Exchange Methods: Centralized exchanges are the best for UPI, bank transfer, and card payments; peer-to-peer (P2P) is another option through platforms such as LocalBitcoins and Paxful; cash/card is accepted across several Bitcoin ATMs in big cities, and OTC desks provide services for large trades.
• DeFi use: Interact with Uniswap, Aave or Compound, but be wary of unregulated risks; there’s AML obligations applied to custodial services.
• NFT Notes: You can trade on OpenSea and Rarible; double check IP for fan art, beware scams; you will be subject to a 30% tax on all profits.
• Regulatory Compliance -10/1 – All crypto businesses must register with FIU-IND, KYC and transaction monitoring under the PMLA.
• Tax liabilities: 30% tax for crypto/NFT gains; 1% TDS on transactions over INR 10,000; no long holding period waiver.

Recent Developments and Outlook

The Progression of Legislation and Regulation

The Finance Act 2022 and PMLA amendments have bolstered India’s crypto regulatory framework, and have been well received in virtual spaces for bringing about regulatory clarity and space for experimentation. Consumer protections and regulatory oversight are set to be bolstered by the upcoming Crypto Assets Governance Bill due around mid-2025, which will also tackle debanking, in a move that will harmonize with international sets. These steps showcase how India wants to tread the middle path of propagating the crypto growth while at the same time containing a potential risk.

Conclusion

India has an advancing but wary cryptocurrency environment, with the PMLA and Finance Act 2022 laying the groundwork for AML/CTF compliance and taxation. The projected Crypto Assets Governance Bill would suggest a wider legislative regime that encourages development, while protecting consumers. Crypto adoption is enabled by platforms such as WazirX and international exchanges, as well as P2P trading and Bitcoin ATMs. – The unregulated DeFi and NFT markets provide opportunities but also pose risks, as there are no special laws. “While considering issuance of the MiCAR on background of the ongoing global regulatory learning, it is evident that India is moving towards adopting similar regulations as existing globally fiat and crypto intermediaries regulation As such it’s expected that India would come out with more detailed regulations around DeFi and NFTs to help realise a more robust digital asset eco-system.”