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India is set to release a long-awaited discussion paper this month outlining its approach to virtual digital assets (VDAs), in what may be the most significant development in the country’s crypto policy since the introduction of its controversial tax regime in 2022. The forthcoming framework aims to provide regulatory clarity for exchanges, investors, and policymakers, while aligning India’s stance with international standards set by the Financial Stability Board (FSB) and the International Monetary Fund (IMF).
The move follows growing pressure from both domestic courts and the global investment community to clarify the country’s position on cryptocurrencies. In May, India’s Supreme Court described crypto trading as akin to a “hawala business,” pushing the government to move decisively on legislation. Meanwhile, Indian regulators have been meeting regularly with representatives from the crypto industry, a shift from the sporadic and opaque engagements of the past.
From Taxation to Regulation
Since 2022, India has enforced one of the harshest crypto tax regimes in the world, a flat 30% capital gains tax and a 1% tax deducted at source (TDS) on all transactions. While this policy has dampened domestic trading volumes and driven many users to offshore platforms, it failed to establish legal recognition or institutional safeguards around crypto use.
The June 2025 paper is expected to address that vacuum. Early reports suggest it will tackle five core areas: how to classify virtual digital assets; licensing requirements for exchanges and custodians; KYC/AML protocols to counter illicit finance; a possible revision of the current tax regime; and the interplay between private cryptocurrencies and India’s own central bank digital currency, the digital rupee.
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Critically, the document is not expected to propose immediate legislation, but rather act as a consultative blueprint to gather public and industry feedback. According to officials familiar with the matter, this paper is intended to be “deliberative, not declarative”, a signal that India may be looking to strike a balance between innovation and caution.
A Changing Industry Mood
India’s crypto sector has responded with cautious optimism. Sumit Gupta, co-founder of CoinDCX, described the announcement as a “defining moment” for the industry, noting that the move could “spark public discussion, but not commit the government to immediate legalization.” His comments reflect a wider sentiment among Indian Web3 entrepreneurs, who have long sought a middle path between regulatory engagement and operational freedom.
Ashish Singhal, co-founder of CoinSwitch, added that communication between industry and policymakers has become “monthly, if not weekly”, a marked shift from the regulatory ambiguity that characterized India’s crypto climate in previous years.
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In a further sign of confidence, global exchanges such as Coinbase and Binance have resumed expansion efforts in India after periods of inactivity, pointing to an expectation that clarity will soon replace uncertainty.
RBI Remains Firm
Yet not all regulators are aligned. The Reserve Bank of India (RBI) has maintained a firm stance against private cryptocurrencies. In recent remarks, Department of Financial Services Secretary Sanjay Malhotra reiterated that the RBI remains deeply concerned about the potential risks crypto poses to monetary policy and financial stability. “There has been no change in our view,” he said, underscoring a persistent institutional divide between the central bank and the Ministry of Finance.
This divergence is likely to surface in the consultation period following the paper’s release. While the Finance Ministry appears inclined to adopt a regulatory framework modelled on international best practices, such as the EU’s MiCA rules or the U.K.’s phased licensing regime, the RBI continues to press for stricter limitations, or even an outright prohibition on certain digital assets.
What Happens Next?
The government is expected to publish the discussion paper in the second half of June. A formal window for public and industry commentary will follow, potentially extending into Q3. If momentum continues, a draft regulatory bill could be tabled in Parliament before the end of the year.
While the discussion paper won’t immediately alter existing crypto tax laws or enforcement practices, it represents a shift from ambiguity to structured policymaking. For India, the world’s most populous country and one of the fastest-growing digital economies, this moment could be the beginning of a more mature, globally aligned crypto ecosystem.
A Global Signal
India’s crypto regulation journey will be closely watched by other emerging economies grappling with similar challenges. With a market of over 100 million users and growing interest in blockchain innovation, India’s policy choices carry weight far beyond its borders. If executed well, the new framework could position India as a leader among G20 nations in establishing a balanced, future-ready crypto regime.
