Urgent Regulation Needed for Cryptocurrencies and Digital Assets by India's Top Court
In the rapidly advancing world of cryptocurrencies and blockchain technologies, India finds itself at a pivotal juncture. The Supreme Court of India has urged the government to establish clear policies, emphasising that a lack of regulation could hinder the formal adoption of these technologies and put the country at a disadvantage compared to nations already regulating and fostering innovation in the sector.
The legal limbo surrounding cryptocurrencies in India has generated legal uncertainty and hindered capital investment in the sector. The Supreme Court has stated that prohibiting cryptocurrencies would not eliminate them but rather drive them underground. As of mid-2025, cryptocurrencies are legal to hold and trade but not recognised as legal tender. They are classified as Virtual Digital Assets (VDAs) and subject to a 30% tax on profits and a 1% tax deducted at source (TDS) on transactions above certain thresholds.
Regulatory oversight has been expanding, with SEBI monitoring tokens resembling securities and plans for a multi-agency regulatory framework involving the Reserve Bank of India (RBI), SEBI, and the Finance Ministry. The government is also preparing for a global-aligned regulatory framework, including the implementation of the Crypto-Asset Reporting Framework (CARF) by 2027 to enhance tax transparency amid rising crypto adoption.
This regulatory evolution is crucial for India’s economic growth and technological advancement. Cryptocurrencies offer potential benefits such as boosting financial inclusion, fostering fintech innovation, and attracting digital investments. However, the current cautious approach and heavy taxation are seen as limitations that may hinder the crypto sector’s growth and India’s ability to compete globally in the emerging digital asset economy.
Key aspects highlighting the importance include financial inclusion, innovation, global competitiveness, and fiscal discipline. Crypto can provide access to financial services for underbanked populations. A supportive regulatory environment encourages blockchain development and fintech startups. Aligning regulation with international standards positions India as a digital economy leader. Transparent tax frameworks prevent evasion while fostering trust and market integrity.
While India has made strides in setting clear tax rules and regulatory oversight, ongoing initiatives like the proposed Crypto Assets Regulatory Authority (CARA) and public consultations indicate that regulatory frameworks will continue to evolve to balance innovation and risk management.
Countries like Switzerland and Singapore have established clear policies that allow businesses to operate safely and users to protect their assets and data, leading to the growth of their fintech sectors. The implementation of blockchain technology has the potential to provide significant opportunities for growth and economic development in India. Appropriate regulation fosters innovation and economic growth, attracting companies and startups seeking to develop technological solutions in a reliable framework.
However, the lack of clear rules allows for illicit activities and scams, hinders consumer protection, and threatens financial stability. The Supreme Court of India has expressed concern over the lack of regulation in the cryptocurrency sector and has referred to examples of countries that have chosen to regulate cryptocurrencies, achieving a balance between innovation and security.
In conclusion, India's cautious and evolving approach to cryptocurrency regulation is essential for its economic growth and technological advancement. A clearer, balanced regulatory framework could unlock innovation, increase investor confidence, and integrate crypto technology into India’s financial system with safeguards for financial stability and tax compliance.
Finance and technology intersect in the evolving regulation of cryptocurrencies in India. For instance, a supportive regulatory environment could attract digital investments, fostering fintech innovation and financial inclusion. However, the current taxation structure and lack of clear rules might hinder the growth and competitiveness of India's crypto sector in the global digital asset economy, threatening financial stability and investor confidence.
