In recent years, crypto has emerged as a fascinating and distinct asset class. It has captured the attention of governments, institutions, investors, traders, and regulators alike. It rose rapidly from being a niche, technology-driven experiment to a trillion-dollar industry. However, for many people in India, crypto remains shrouded in mystery—what exactly is it? Is it legal? How is it taxed? And most importantly, how does India compare to the rest of the world in terms of regulation and adoption? Let us examine these aspects in order:
Understanding Crypto: A New Digital Asset Class
At its core, crypto refers to digital assets secured by cryptography. Crypto operates on decentralised networks using blockchain technology. Bitcoin, introduced in 2009 by the pseudonymous Satoshi Nakamoto, was the first crypto asset. It was designed as a peer-to-peer alternative to traditional currencies. Over time, the industry has expanded to include thousands of digital assets, each with unique utilities. For example, Ethereum (ETH) enables smart contracts while stablecoins are pegged to currencies like the US Dollar.
Unlike conventional currencies issued by central banks (fiat currencies), crypto operates on decentralised ledgers run on the blockchain. This ensures transparency and security. Transactions are verified by network participants (miners or validators). This eliminates the need for intermediaries. The decentralised nature is both the strength and the challenge of crypto. In this set up, crypto offers unparalleled financial freedom but also raises concerns around regulatory oversight.
The Legality of Crypto in India
One of the most common questions we encounter is, “Is crypto legal in India?” The short answer is yes, investing in crypto is legal. The long answer is nuanced. Owning, trading, and investing in crypto is legal in India. The government has adopted a cautious stance, focusing on regulation rather than outright prohibition. As of now, the Ministry of Economic Affairs is working on a concept paper on crypto. This was recently confirmed by the secretary of the Department of Economic Affairs. The paper is expected to define the scope and utility of crypto assets in the Indian framework.
The IT Bill, presented in the Lok Sabha on February 13 this year, explicitly describes virtual digital assets (VDAs) ‘as a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions.’ This formalisation is seen as a step towards bringing crypto within the ambit of the Indian financial framework. The government, by doing this, has moved the sector towards greater regulatory clarity. This is expected to play a crucial role in the mainstream adoption of blockchain-based financial instruments like crypto.
The Taxation of Crypto in India
The biggest regulatory development in India came in 2022 when the government introduced a tax regime for crypto transactions. Under the current framework:
- A 30% tax is levied on profits from crypto assets.
- A 1% TDS (Tax Deducted at Source) applies on the sale of crypto assets exceeding ₹50,000 within a single financial year.
- Losses from crypto trading cannot be offset against other crypto assets or other losses, making tax planning crucial for traders.
The taxation, though on the higher side, provides clarity on how the government views crypto from a revenue perspective. The crypto sector has been engaging with the government to rationalise the taxes and do a downward revision to bring in more people into the system.
The Global Shift: How Other Countries Are Embracing Crypto
Of late, the Government of India has been keenly observing changes in international jurisdictions and understanding the change in position of various countries with regard to crypto adoption. To state a case, US president Donald Trump and entrepreneur Elon Musk have been advocates of crypto. The US has already announced a strategic crypto reserve that includes Bitcoin and Ethereum among others.
The European Union has established comprehensive frameworks to classify and regulate digital assets. The UAE and Singapore have positioned themselves as crypto-friendly hubs, attracting innovation and investment. Even traditionally conservative financial markets, like Japan and South Korea, have embraced crypto with strict yet clear regulations.
The trend is evident—crypto is not just a passing fad but a fundamental shift in financial technology. Countries that recognize this and create frameworks for responsible adoption will lead the next wave of digital economic growth.
Key Tip for Investors
For investors and traders, the key takeaway is this: crypto is not banned or illegal but there is a need for more regulatory clarity. Those looking to participate in this growing asset class should do the following:
- Choose a reliable crypto exchange (like Giottus) which is registered with the Financial Intelligence Unit (FIU) of the Union Ministry of Finance.
- Understand the tax implications and focus on long-term value rather than speculation.
- Learn as much as you can about the various assets. Depend on learning materials available with exchanges or other trustworthy sources.
India has the potential to lead the crypto and Web3 revolution, just like how we did with computing and software delivery. Anyone can earn profits with the right amount of knowledge, risk assessment, and guidance. To state the least, this is a great time to start your crypto journey and make the best of it.
(By Vikram Subburaj, is an alumnus of IIM-Calcutta. He founded Giottus in 2017 along with his IIM batchmate Arjun Vijay).
