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One Step Forward and Two Steps Back: Crypto Developments in India and What They Mean for Your Business

One step forward and two steps back: Crypto developments in India and what they mean for your business

In a much-anticipated move, India seems to be on the path to legitimising the crypto sector. The news, however, is neither certain nor entirely positive.


Earlier this month, India’s Finance Minister, Nirmala Sitharaman, announced that gains from trading in "virtual digital assets", including cryptocurrencies and non-fungible tokens (NFTS), would be subject to a gross basis tax of 30 per cent. Further, she indicated that losses from crypto trading could not be offset against other income.

The finance minister noted that India will issue a central bank digital currency, the Digital Rupee, by March 2023.


India has ranked second in crypto adoption per the Global Crypto Adoption Index for 2021, released by Chainalysis. Chainalysis platform provides blockchain data and analysis to governments, banks, and businesses worldwide.

Research conducted by NASSCOM, entitled "Cryptotech Industry in India- Decentralized Systems at the Centre Stage of Digital Evolution", indicates that there are 15 million retail crypto investors in India and shows a 39% increase in the size of the Indian crypto market from US$53.1 million in 2020 to US$74.2 million in 2021.

The growth in crypto-asset investors and market size notwithstanding, India’s approach to virtual digital assets has been defined by caution and scepticism. As recently as November 2021, India’s parliament was understood to be considering measures to prohibit all private cryptocurrencies in India.

Thus, the recent announcement is welcome to the extent it represents an apparent legitimisation of investments in digital assets.


The recent announcement notwithstanding, the debate over crypto assets in India seems far from over. After the finance minister’s announcement, RBI Governor Shaktikanta Das, a long-time critic of digital assets, remained sceptical, opining that "cryptocurrencies have no underlying [value] — not even a tulip." He went on to assert that, "[p]rivate Cryptocurrency is a huge threat to macro-economic stability and financial stability . . . investors should keep this in mind that they are investing at their own risk."

The RBI governor’s comments coupled with the finance minister’s announcement regarding the Digital Rupee suggest that additional clarity regarding the legitimacy of private cryptocurrencies in India is needed.

In addition, the announced tax on gains from transfers of digital assets may curb investments. Whilst some in the industry have welcomed the finance minister’s announcement as providing a tacit legitimacy to crypto investments, others worry that the 30% tax rate and its gross basis — the rate at gambling gains are taxed — may push traders away from the crypto market and back to more traditional investments, e.g., shares. This may well be intentional, as other governments have attempted to dissuade retail investment in digital assets.

Further, uncertainty remains regarding the tax treatment of gains and losses from crypto trading vis-à-vis other gains and losses. For example, the finance minister’s announcement indicates that losses from crypto trading cannot offset other gains. Traders and tax specialists are unclear if this limitation applies to gains other than from crypto-asset transactions, or even to classes of crypto assets, e.g., different cryptocurrencies.

There are also reports that the Indian government is considering how to tax the mining of cryptocurrencies, with speculation that the activity will be subjected to the goods and services tax (GST).

With much detail missing, including the text of proposed legislation, fintech companies, digital asset exchanges, brokers, and traders in India face continued risk.

What Now?

With the shifting and continuously changing landscape of digital assets in India, we’ve asked Pragma’s Head of Compliance, Conduct, and Regulatory Risk, Michael Brevetta, to share his insights.

"Without additional details, the state of the digital asset market in India remains unclear. Although a tacit acceptance of crypto assets’ legitimacy is encouraging, continued debate, a lack of clarity, and the announced tax implications create significant risks for fintech companies/crypto exchanges and brokers seeking to operate in India, as well as for Indian investors desiring to trade in digital assets," Brevetta said.

"Given this ongoing debate and lack of detail, companies looking to undertake crypto-related activities in India should continue to evaluate their strategies as more details become clear. India’s approach to digital assets has been very cautious and crypto companies should exercise similar caution in response," he added.

Get in touch for a risk-free consultation. We have supported leading crypto businesses in obtaining licenses globally. Speak to our experts and dive deeper into the potential implications for your business.


Crypto developments
Virtual digital assets
Non-fungible tokens (NFTs)
Digital Rupee
Crypto adoption
RBI Governor
Tax implications
Fintech companies
Regulatory risk

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