The story of cryptocurrency in India has not been easy- being one in which the country wavered between outright bans, heavy taxations Crypto Regulations in India and sluggish paces of regulation. By 2025, the environment is much more developed. India has not prohibited crypto but it has adopted the regulators first approach in trying to manage and regulate the ecosystem.
In that case, how does crypto exist in India in 2025? So here is a look at the new laws, compliance rules, taxation policies and what does it all imply to traders, startups and investors.
A Look Back: India’s Crypto Regulation Timeline
- 2018: The Reserve Bank of India (RBI) banned banks from supporting crypto-related businesses.
- 2020: The Supreme Court lifted the RBI’s crypto ban, reviving Indian exchanges like WazirX and CoinDCX.
- 2021–2022: Government introduced a draft bill proposing a potential ban, but it was never passed.
- 2022:Any gain in crypto made in India is subjected to 30 percent in a flat rate and a 1 per cent TDS (Tax Deducted at Source) on all crypto is applicable.
- 20232024: The government stopped thinking about the ban but started regarding models of regulation and control of the object of regulation toward the integration of crypto and control.
- 2025: India introduced stricter exchange licensing rules, clear KYC/AML policies, and minor tax reliefs, signaling progress toward maturity.
What’s New in 2025? Major Legal & Regulatory Updates
Legal Status of Cryptocurrency in India
As of 2025:
- Crypto is legal to own, trade, and hold in India.
- It is not recognized as legal tender — you can’t use Bitcoin to buy coffee legally, but you can trade or invest in it.
- Crypto is classified as a “Virtual Digital Asset” (VDA) under India’s tax and compliance frameworks.
Role of SEBI in Regulating Crypto
The Securities and Exchange Board of India (SEBI) now oversees the compliance and registration of all crypto platforms. It introduced a VDA Regulatory Framework that mandates:
- Exchange registration and disclosure filings
- Periodic audits and security assessments
- AML monitoring and reporting
- KYC integration with Aadhaar or PAN
Exchange Licensing & Compliance Rules
Crypto exchanges operating in India must:
- Be registered as Indian entities
- Comply with SEBI’s VDA framework
- Store More user funds in cold wallets, at least 70 percent
- Where a suspicious transaction is reported, address to the Financial Intelligence Unit (FIU-IND)
Unregistered foreign exchanges (Binance, KuCoin, etc.) are blocked by IP address and cannot be used by Indian users until they collaborate with licensed local services.
Crypto Taxation in India 2025
Capital Gains Tax
- The 30% flat tax on profits from crypto trades remains unchanged.
- No deductions are allowed other than the cost of acquisition.
- Losses from crypto cannot be set off against other income.
TDS Update
- The 1% TDS rule under Section 194S still applies, but now only on trades exceeding ₹50,000/year for individual investors.
- For businesses and HFT traders, the 1% TDS remains applicable across all trades.
Reporting Obligations
- Traders must declare crypto holdings in ITR Schedule VDA.
- Audit-prone accounts must include:
- Wallet addresses
- Coin type
- Transaction logs
- Counterparty details for P2P trades
RBI’s Position & the Rise of the Digital Rupee (CBDC)
The Reserve Bank of India (RBI) continues to issue cautionary statements on the volatility and risks of private cryptocurrencies but has not banned them.
Meanwhile, the Digital Rupee (CBDC) is expanding rapidly. As of mid-2025:
- Retail CBDC trials have launched in 12 major cities.
- Integration with UPI and bank apps is ongoing.
- Some government benefits are now being disbursed through the Digital Rupee.
The RBI favors CBDC use for stability and financial inclusion, but private crypto use is still tolerated — within strict boundaries.
Impact on Traders and Investors
Benefits:
- Legal clarity has boosted confidence in Indian exchanges.
- Relief on the 1% TDS threshold allows more flexibility for casual traders.
- More secure and audited platforms are available.
Challenges:
- High 30% tax remains a barrier for frequent or professional traders.
- Detailed reporting increases complexity.
- DeFi platforms remain largely unregulated and carry legal risks.
Impact on Crypto Startups & Businesses
Crypto entrepreneurs now have a clearer path to operate legally:
- They can apply for VDA business licenses under SEBI.
- Startups must have:
- Indian corporate registration
- Data localization infrastructure
- Strong KYC/AML systems
Nevertheless, DeFi protocols, P2P trading platforms, and non-custodial wallets remain in a legal gray area, with no official regulation of them, so far.
India on the Global Crypto Map
India’s current policy is more restrictive than regions like:
- UAE (with crypto-friendly free zones)
- Singapore (light regulatory frameworks)
But less restrictive than:
- China (full ban)
- Algeria, Egypt, Morocco (crypto use criminalized)
India is complying with FATF guidelines and policy frameworks developed by G20 regarding the transparency of cross-border transactions, anti-money laundering, and tax charges.
What’s Next for Crypto in India?
Expected developments in late 2025 and early 2026:
- A draft VDA Regulatory Bill is under consultation in Parliament.
- NFT regulation and DeFi taxation policies are under discussion.
- Simplified taxation for small investors and freelancers may be introduced.
- India may explore tokenized securities and asset-backed stablecoins under SEBI sandbox programs.
Final Thoughts
India in the year 2025, did not ban crypto, the country is regulating crypto. Though the tax pressure also remains significant, licensing, KYC, and legalization have created the possibility, and crypto is already a legitimate asset class, albeit with a lot of regulation.
For investors, staying compliant is essential. For startups, India is now offering a structure to operate legally — provided they’re willing to follow the rules.