The Uncertain Crypto Regulatory Environment in India
Despite the Supreme Court overturning the central bank ban on crypto, the regulatory environment in India remains uncertain. The Reserve Bank of India (RBI) continues to advocate for banning crypto, likening it to Ponzi schemes. At the same time, the Indian crypto community has been calling for balanced regulations, but the government has failed to introduce a crypto bill in parliament.
Indian Government Notices and App Blocks
The Indian government issued notices against several offshore crypto exchanges for operating illegally without registering as a “reporting entity.” This led to Apple blocking apps like Binance, KuCoin, and Huobi in India. The aim of these app blocks is to prevent users from flocking to foreign exchanges after India imposed high crypto taxes last year.
Messy Policymaking and Attempts to Contain Fallout
Last year, without a regulatory framework in place, India imposed a 30% tax on crypto gains and a 1% deduction on transactions. This triggered plummeting trade volumes as users turned to offshore exchanges. Now, the Indian government’s Financial Intelligence Unit (FIU) has issued notices against foreign exchanges operating illegally. Apple has preemptively banned certain apps, while Google Play still lists them.
Domestic Exchanges Encourage Transfer of Assets
Leading Indian exchanges like CoinDCX have encouraged users to transfer their assets back to India-based platforms through rewards programs. However, many Indians may continue accessing blocked exchanges through VPN workarounds due to the lure of pseudo-anonymity and avoiding tax obligations.
Tension Between Clamping Down and Fostering Innovation
There is little agreement on what regulations should govern cryptocurrency trading in India. The centers of power in Delhi seem aligned that tough rules are necessary, but how this tension between clamping down on crypto and fostering innovation gets resolved will shape the landscape for Bitcoin and other digital assets in South Asia.
Hot Take: Uncertainty Lingers in India’s Crypto Regulatory Landscape
The regulatory environment for cryptocurrencies in India remains uncertain, with conflicting views and a lack of clear regulations. While the Supreme Court overturned the central bank ban, the RBI continues to push for a ban on crypto. The Indian government has yet to introduce a crypto bill in parliament, leaving the crypto community calling for balanced regulations. Recent notices and app blocks against offshore exchanges aim to prevent users from flocking to foreign platforms after high crypto taxes were imposed last year. Leading Indian exchanges encourage users to transfer assets back to India-based platforms, but many may still access blocked exchanges through VPNs. The tension between clamping down on crypto and fostering innovation will shape the future of digital assets in South Asia.
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