Cryptocurrency Law in India: Current Legal Status and Regulatory Landscape (2025)

Cryptocurrency law in India has undergone significant transformation over the past decade. From a time of regulatory uncertainty and outright skepticism to the current structure where digital assets are taxed and partially regulated, India has made noticeable strides in shaping its approach toward virtual currencies.

In 2025, cryptocurrencies are not recognized as legal tender in India, but they are legal to hold, trade, and invest in—under specific conditions and regulations. With growing adoption and government oversight, it is crucial to understand the current legal status, compliance obligations, taxation rules, and future developments surrounding cryptocurrency in India.

Legal Status of Cryptocurrency in India

As of 2025, cryptocurrencies are classified as Virtual Digital Assets (VDAs) under the Income Tax Act, 1961. They are not considered legal tender, which means they cannot be used for transactions like fiat currency, but they are not banned either.

Permissible Activities:

• Buying, selling, and holding cryptocurrencies
  

• Trading on domestic and FIU-IND registered international exchanges
  

• Investing in cryptocurrencies as digital assets
  

Prohibited Activities:

• Using cryptocurrencies as payment for goods or services
  

• Operating unregistered exchanges or wallets
  

• Evading taxes or transacting anonymously beyond regulatory thresholds
  

The Indian government has taken a cautious stance, allowing crypto to exist within a strict framework of taxation and anti-money laundering oversight.

Timeline of Regulatory Developments (2018–2025)

Regulatory Bodies Governing Cryptocurrency in India

While India does not yet have a single, dedicated cryptocurrency regulator, oversight is divided among several existing financial institutions and departments.

Key Institutions:

• Ministry of Finance – Policy-making and taxation regulations
  

• Reserve Bank of India (RBI) – Monetary policy and digital currency regulation
  

• Financial Intelligence Unit-India (FIU-IND) – Enforcement of AML/KYC under the Prevention of Money Laundering Act (PMLA)
  

• Central Board of Direct Taxes (CBDT) – Oversight of taxation compliance
  

• Securities and Exchange Board of India (SEBI) – May regulate crypto-based securities in the future
  

Cryptocurrency Taxation in India (2025)

The government of India has taken a clear stance on digital assets or crypto taxation, even in the absence of a comprehensive crypto bill. The Finance Act, 2022 introduced a formal taxation framework under Section 115BBH.

Tax Structure:

• Flat 30% tax on profits from cryptocurrency sales
  

• 1% TDS on transactions above ₹10,000 per year (₹50,000 for specified persons)
  

• No deductions other than cost of acquisition allowed
  

• Losses from crypto cannot be offset against other income
  

Reporting Requirements:

• Income from crypto must be disclosed in the Income Tax Return (ITR)
  

• Holdings in foreign exchanges or wallets may be subject to the Black Money Act
  

• Exchanges are mandated to share user data with tax authorities
  

Cryptocurrency gifts exceeding ₹50,000 are also taxable in the hands of the recipient, unless exempt under specific provisions.

FIU-IND Registration for Exchanges

To prevent misuse and ensure traceability, the Government of India has brought Virtual Digital Asset Service Providers (VDASPs) under the PMLA. This includes crypto exchanges, wallet providers, and even DeFi protocols operating in India.

Requirements for FIU Registration:

• Conduct Know Your Customer (KYC) for all users
  

• Maintain transaction records and report Suspicious Transaction Reports (STR)
  

• Submit high-value transaction data to the Financial Intelligence Unit
  

• Cooperate with law enforcement agencies when required
  

Major exchanges like CoinDCX, CoinSwitch, WazirX, and Binance have registered with FIU-IND as of 2025.

RBI’s Digital Rupee vs Private Cryptocurrencies

India is one of the first countries to launch a Central Bank Digital Currency (CBDC), known as the Digital Rupee. The Digital Rupee coexists with private cryptocurrencies but serves a different purpose.

The Digital Rupee is expected to become interoperable with payment platforms like UPI in the near future.

Challenges and Risks

Cryptocurrencies, despite their advantages, carry certain risks that concern regulators:

• Market Volatility – Sharp price fluctuations can lead to losses for retail investors.
  

• Fraud & Scams – Rug pulls, fake tokens, and unregulated platforms are prevalent.
  

• Money Laundering – Anonymous transactions can bypass traditional financial systems.
  

• Tax Evasion – Lack of disclosure and offshore holdings are hard to track.
  

To address these, regulatory clarity, user education, and technology-based surveillance are being prioritized.

Global Developments Influencing Indian Crypto Law

India is aligning its crypto framework with global guidelines from institutions like:

• Financial Action Task Force (FATF) – For travel rules and AML measures
  

• OECD’s Crypto-Asset Reporting Framework (CARF) – For cross-border information exchange
  

• G20 Finance Ministers’ Recommendations – On responsible digital asset innovation
  

As global consensus improves, India is expected to refine its laws further to balance innovation and investor protection.

Future Outlook for Cryptocurrency Law in India

Looking ahead, several changes are expected in India’s regulatory approach:

• A new Cryptocurrency Regulation Bill could define crypto assets, outline licensing procedures, and protect consumer interests.
  

• Token Classification Framework may differentiate between utility, security, and payment tokens.
  

• Sandbox initiatives by SEBI and RBI may allow experimentation with smart contracts, NFTs, and DeFi.
  

• Decentralized exchanges may be brought under FIU oversight.
  

• Digital Rupee integration with mobile wallets and UPI may become mainstream.
  

These developments would bring much-needed clarity and reduce regulatory arbitrage between domestic and offshore platforms.

Frequently Asked Questions (FAQs)

Is cryptocurrency legal in India in 2025?
Yes. Buying, holding, and trading cryptocurrencies is legal, but they are not recognized as legal tender.

Are crypto earnings taxable in India?
Yes. Profits from the sale of cryptocurrencies are taxed at a flat rate of 30%, with an additional 1% TDS on most transactions.

Can cryptocurrencies be used for payments in India?
No. They are not considered legal tender and cannot be used to pay for goods or services.

Are there any licenses required to operate a crypto business in India?
Exchanges and service providers must register with the Financial Intelligence Unit (FIU-IND) and comply with AML/KYC norms.

Will the government ban cryptocurrencies in the future?
While regulation is evolving, a complete ban is unlikely. Instead, the focus is on establishing a well-regulated framework.

Conclusion

The cryptocurrency law in India, while still developing, has taken a clear direction: legalize the use of crypto as a digital asset, regulate it through tax and compliance, and promote innovation through central bank initiatives like the Digital Rupee.

For investors and entrepreneurs in 2025, the key is compliance. Use only FIU-registered exchanges, maintain accurate tax records, and stay informed about policy changes. With continued reforms and a growing global crypto economy, India’s digital asset ecosystem is poised to mature responsibly.