tl;dr
India plans to release a comprehensive discussion paper on digital asset regulation in June 2025, incorporating insights from international bodies like the IMF and FSB. This move aims to establish a structured regulatory framework amid growing global legitimacy of digital currencies. The Supreme Cou...
India is preparing to release a comprehensive discussion paper on digital asset regulation by June 2025. This paper will incorporate insights from global organizations such as the International Monetary Fund (IMF) and the Financial Stability Board (FSB), aiming to create a structured regulatory framework that aligns with international standards amid the rising legitimacy of cryptocurrencies worldwide.
The Supreme Court of India has expressed strong criticism of the federal government's delay in establishing crypto regulations, pointing out the risks of financial abuse and difficulties faced by law enforcement due to the absence of clear legal guidelines. The court emphasized that this regulatory vacuum has allowed digital currencies to be exploited in illicit activities akin to the informal hawala money transfer system, underscoring the urgent need for effective policy measures.
Meanwhile, the Reserve Bank of India (RBI) maintains a cautious stance, reiterating concerns that digital assets pose threats to financial stability and complicate monetary policy implementation. Past RBI leadership warned that cryptocurrencies could undermine the banking sector and inflation control efforts, advocating stringent oversight. Despite these concerns, the government currently enforces a 30% tax on digital asset income, along with a 1% tax deducted at source on transactions above a set threshold, which has notably suppressed domestic trading volumes.
In a contrasting development, the RBI’s recent 50 basis point interest rate cut to 5.5% has been perceived positively by crypto investors. With traditional savings instruments offering lower returns, many investors are turning to cryptocurrencies as alternative assets, seeking diversification amidst economic slowdown and easing inflation. Industry leaders observe increased interest from both retail and institutional participants, viewing digital assets as strategic portfolio components.
Overall, India is navigating a complex landscape: balancing risks highlighted by its central bank and judiciary with growing market demand and international regulatory trends. The upcoming discussion paper is anticipated to invite public feedback, marking a significant step toward defining the country’s future approach to digital currency regulation.