d Key Takeaways
As crypto assets explode in popularity across the globe, India is taking a slow and steady approach to regulation. Rather than rushing to pass legislation, India is carefully evaluating use cases, evolving global standards, and industry changes in the wake of high-profile crypto collapses.
According to statements made this week, we could be waiting years for regulation from the world’s leader in grassroots crypto adoption .
India made headlines in 2021 when it took a strong stance against private cryptocurrencies (apart from “certain exceptions to promote the underlying technology and its uses”) while laying the groundwork to launch its own Central Bank Digital Currency (CBDC).
In 2022, the country introduced a 30% tax on crypto profits and the 1% tax deducted at source (TDS) on all digital asset transactions. This move provoked a movement toward DEXs and off-shore trading.
Following the industry turmoil of last year, 2023 has seen India shift to a global leadership role. During its presidency of the G20, finance ministers agreed on a regulatory roadmap for the sector that included sticking to international standards set by the Financial Action Task Force (FATF), implementing consistent global regulation, outreach to non-G20 countries, and encouraging data sharing.
In all, the result was a relatively unified strategy for regulating the cryptocurrency industry across the globe. This involves ensuring transparency in crypto transactions by sharing information about who is sending and receiving funds. It also means scrutinizing the operations of virtual asset service providers, like exchanges, more closely. Additionally, the talks included evaluating how well countries are implementing these new standards.
In practice, it means more anti-money laundering (AML)and Know Your Customer (KYC) procedures coming down the pipeline.
India also welcomed a paper from the International Monetary Fund (IMF) and Financial Stability Board (FSB) on approaching crypto regulation. Even with the global direction set, India still has room for maneuver. It is choosing a slightly different path from other large jurisdictions.
Unlike the EU, which this year passed and implemented its landmark MiCA bill , India appears set to spend th next year or so evaluating approaches before making definitive legislation. This week, the Indian Minister of Finance confirmed the country would wait to design a bill more appropriate for an emerging-market economy.
In an interview with CoinDesk this week, Jayant Sinha, Chair of the Parliamentary Standing Committee on Finance, suggested India was unlikely to see a specialized crypto regulatory bill before mid-2025.
Specific use cases and global regulatory standards are still evolving. Additionally, 2024 will see key elections in India, the UK, the United States, and other countries that could shape crypto’s future. India is waiting to see how the chips land before pushing forward with legislation.
Sinha encouraged the tech community to propose an India-specific white paper or regulatory framework. However, Sinha stressed that due to India’s high capital controls that limit the trade of the rupee, “for us to enable crypto assets is not really feasible”.
When India’s regulations do eventually emerge, its novel elements may have little to do with cryptocurrencies themselves, and more to do with blockchains. Cryptocurrency is, according to Sinha “just one use case… that underlie[s] Web3″.