India’s Crypto Adoption Rate Continued to Rise Despite Regulatory Difficulties

Cryptocurrency might not be strictly illegal in India, but heavy taxation has made it more difficult to operate a crypto business there.

Can the global cryptocurrency movement expand even in the face of regional regulatory resistance? It’s a story that continues to unfold in the mid-2020s, with adoption of decentralized digital assets gaining traction in India despite evident pushback from the nation’s authorities.

While cryptocurrency use isn’t strictly prohibited in India, it’s also not necessarily encouraged by the government as crypto isn’t considered legal tender currency there. Moreover, India’s restrictive regulatory framework should, in theory at least, discourage cryptocurrency use and trading – but at the same time, resistance is likely futile as crypto’s worldwide adoption appears to be inevitable.

India’s Hefty Crypto Tax Burden

Cryptocurrency might not be strictly illegal in India, but heavy taxation has made it more difficult to operate a crypto business there. India requires all cryptocurrency service providers and investors to pay a 1% tax deducted at source (TDS) on every cryptocurrency transaction.

That’s not all, though. On top of the 1%-per-transaction TDS, all cryptocurrency investment profits in India are subject to a 30% tax.

This jaw-dropping 30% flat crypto-profit tax was, per a CoinTelegraph report, “heavily inspired by countries’ gambling and horse betting tax rules.” Hence, the massive tax requirement “signifies that the Indian government likens the crypto market to gambling.”

Back in January, Indian authorities went so far as to ban Binance and several other offshore cryptocurrency exchanges from operating in the country. Then, in August, India’s Directorate General of Goods and Services Tax Intelligence (DGGI) levied a surprisingly large tax requirement on Binance equivalent to $86 billion.

Binance demonstrated its willingness to pay the hefty tax requirement and, before the year was over, regained access to India’s vast and growing cryptocurrency market. Still, India’s harsh treatment of offshore crypto exchanges demonstrated the country’s reluctance to let down its guard. Even to this day the Indian cryptocurrency sector awaits a comprehensive regulatory framework to provide clarity and legal certainty for establishing and expanding their operations.

Binance Head of Regional Markets Vishal Sacheendran commented on the need for a favorable regulatory framework, “Regulatory focus on virtual assets and crypto is welcome. That said, with the use cases of blockchain technology extending beyond finance applications, it is important for regulators, industry experts, and technology providers to come together and develop effective regulatory frameworks for multiple sectors where blockchain tech is making its presence felt.”

A History of Pushback

The imposition of a 30% crypto-profit tax and the temporary ousting of Binance weren’t India’s first instances of regulatory pushback against cryptocurrency’s adoption. In 2018, the Reserve Bank of India (RBI) forbade lenders and other financial institutions from working with cryptocurrency exchanges and their users.

Apparently, India’s central bank believed that cryptocurrency use could lead to tax evasion and, more generally, fiscal instability. However, India’s Supreme Court reversed the RBI’s decision in 2020.

Additionally, per the Crypto Council for Innovation, the RBI “called on financial institutions to comply with strict money-laundering and foreign exchange rules” in March 2023. While this move wasn’t an outright ban on cryptocurrency use, it did seem to promote an image of digital assets as a haven for bad actors.

Not all of India’s regulatory entities have been as resistant as the DGGI and RBI, though. Encouragingly, the Securities and Exchange Board of India (SEBI) seeks to establish a multi-agency approach to cryptocurrency oversight. Moreover, the SEBI has broached the possibility of issuing licenses for equity market products, potentially including cryptocurrency.

And just maybe, the RBI will eventually soften its stance on decentralized digital assets. After all, the RBI did make a central bank digital currency (CBDC), known as the digital rupee, available to the public in 2023 – and interestingly, transactions with this CBDC aren’t subject to the same tax burden as cryptocurrency transactions are.

High Usage Despite Challenging Environment

Given the pushback presented by some government entities, one might assume that cryptocurrency usage in India would be low. Yet, a report from Chainalysis revealed that in 2024, India has led the world in terms of crypto adoption for the second consecutive year.

This is remarkable in light of India’s crackdown on cryptocurrency exchanges and weighty tax burdens. As the data shows, seven of the top 20 leading countries in terms of crypto adoption were located in the Central and Southern Asia and Oceania (CSAO) region – and India outpaced them all in 2024, believe it or not.

Will this trend persist into the new year? It’s entirely possible as changes are evidently afoot despite resistance from some entities. According to Eric Jardine, research lead at Chainalysis, India has a “fairly wide spread level of adoption across different assets of crypto despite restrictions, implying new participants to crypto would have been participating via services that were not banned.”

Furthermore, Jardine has “started to see some of those restrictions get rolled back, for example with Binance, which is probably just going to amplify adoption in the country.” Thus, the cryptocurrency adoption curve can continue to point upward in 2025, even amid the challenging regulatory landscape of India.

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