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India’s regulatory ecosystem for digital currencies remains a study in contrasts. While the country claims the world’s highest grassroots cryptocurrency adoption rate, as highlighted in Chainalysis‘ 2025 Global Crypto Adoption Index, policymakers continue to favor Central Bank Digital Currencies (CBDCs) like the digital rupee (e₹) over decentralized cryptocurrencies.
This preference stems from concerns over financial stability, illicit activities, and monetary sovereignty, even as crypto transactions face steep taxation that discourages widespread use. Whether or not these concerns are genuine, it is clear that traditional financial system backers including ECB President Christine Lagarde continue to claim that cryptocurrencies like Bitcoin have no intrinsic value. However, crypto industry professionals like Litecoin founder Charlie Lee argue that Bitcoin is the best form of investment and people should continue to hold it for long-term gains.
Unsurprisingly, recent statements from officials in India underscore a more cautious approach towards crypto, while also acknowledging the potential of stablecoins—pegged digital assets like USDT or USDC—to streamline remittances, potentially saving billions in fees annually.
India’s position atop the Chainalysis Global Crypto Adoption Index reflects steady on-chain activity, with the Asia-Pacific (APAC) region—led by India—seeing a 69% year-over-year surge in crypto transaction volume, reaching $2.36 trillion in the 12 months ending June 2025.
The index, which measures grassroots usage adjusted for population and purchasing power parity, ranks India first across retail centralized exchanges, DeFi engagement, and institutional flows. This marks the third consecutive year India has led, driven by its young, tech-savvy population using crypto for trading, savings, and remittances despite regulatory hurdles.
Cryptocurrencies are not illegal in India and currently operate in a heavily taxed and monitored environment. Under the Income Tax Act (as amended in the 2025 Income Tax Bill), gains from Virtual Digital Assets (VDAs)—encompassing cryptocurrencies, NFTs, and tokens—are taxed at a flat 30% rate (roughly speaking), with no deductions for expenses beyond acquisition costs and no loss set-offs against other income.
Additionally, a 1% Tax Deducted at Source (TDS) applies to transfers exceeding ₹50,000 annually (or ₹10,000 for certain taxpayers), and an 18% Goods and Services Tax (GST) now covers platform fees for trading, staking, and withdrawals as of July 2025.
These measures, introduced in Budget 2022 and refined in subsequent years, aim to curb speculation and money laundering but have drawn criticism for stifling innovation.
Offshore exchanges must comply with FIU-IND registration, and non-compliance can lead to penalties under the Prevention of Money Laundering Act (PMLA).
This fiscal hostility aligns with the Reserve Bank of India’s (RBI) long-standing warnings. In November 2023, RBI Governor Shaktikanta Das described cryptocurrencies as having a “destabilizing effect” on the economy, advocating CBDCs as a safer alternative.
Recent reports had indicated regulators are mulling a ban on private cryptos like Bitcoin and Ethereum, viewing them as riskier than state-backed options.
As one senior official contended in October 2024 consultations, “CBDCs can do whatever cryptos do” but with greater control and minimal risks.
Indian lawmakers and experts have repeatedly endorsed CBDCs for everyday digital transactions, positioning the e₹ as a controlled evolution of payments infrastructure.
Launched in pilot form in December 2022, the digital rupee has expanded significantly by 2025, with circulation reaching ₹10.16 billion ($122 million) by March—a 334% increase from the prior year.
Over 5 million users and 16 banks participate, including tests for agricultural lending via State Bank of India.
On October 7, 2025, Finance Minister Piyush Goyal reiterated the government’s commitment, criticizing “unbacked cryptocurrencies” and detailing plans for a fully RBI-guaranteed digital currency.
Goyal emphasized its role in financial inclusion, faster settlements, and reduced reliance on physical cash, aligning with RBI’s Payments Vision 2025.
The RBI’s concept note highlights CBDC’s programmability for targeted welfare transfers and cross-border use, compliant with anti-money laundering laws. However, critics have argued that CBDC transactions may increase government monitoring and surveillance, thus potentially infringing on users’ privacy.
This stance contrasts with global pro-crypto shifts; while the U.S. approved Bitcoin ETFs and the EU advanced MiCA regulations, India prioritizes sovereignty.
A 2025 AZB Partners review notes the RBI‘s preference for CBDC to mitigate crypto’s risks, such as volatility and illicit finance, while harnessing blockchain for innovation. It is worth noting that the traditional financial system is responsible for the vast majority of illicit activities and blaming crypto for this may not be completely fair or reasonable.
Experts like former RBI Executive Director G. Padmanabhan have urged swift policy clarity to avoid the “drift” seen in crypto regulation. In nearby China, authorities appear to have a similar hostile stance towards crypto-assets, but local residents and business owners continue to actively engage in such transactions. The governments in these countries are now fully aware of these activities, but do not seem to be doing enough to encourage more responsible innovation while ensuring adequate consumer protection.
Meanwhile, in Pakistan, the country does appear to be taking an increasingly positive stance towards crypto and blockchain. Despite recent claims of supporting this nascent industry, Pakistan has failed to actually take meaningful actions to help facilitate the growth of the web3 space in the Asian country. Despite these shortcomings, the nation has considerable potential as it still ranks among the world’s 25 largest economies in terms of GDP (in terms of PPP with China being first ahead of the US and India at 4th place according to available data).
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