Indian Government's Stance on Cryptocurrency Regulation

The Indian government has disclosed its current stance on cryptocurrency regulation, clarifying that there are no immediate plans to regulate the sales and purchase of cryptocurrencies. Instead of focusing on regulation, the government is emphasizing oversight on crypto-related money laundering and terror financing activities. Pankaj Chaudhary, the Minister of State in India’s Ministry of Finance, addressed questions during a parliamentary meeting regarding the nation’s position on crypto regulations. Chaudhary mentioned that India has not conducted any specific studies to assess the adoption levels of cryptocurrencies among its population. He highlighted that crypto assets or Virtual Digital Assets (VDAs) remain unregulated in India, and the government does not gather data on these assets. While India has implemented a tax system for cryptocurrency transfers and profits from April 1, 2022, no regulatory framework for crypto trading is in place. The tax law mandates citizens to pay a 30% tax on unrealized crypto gains and a 1% tax deducted at source (TDS). Despite efforts to combat Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) through crypto regulations, India has refrained from regulating the sales and purchases of cryptocurrencies. The government's focus on AML and CFT compliance was evident when offshore crypto exchanges like Binance, KuCoin, Bitget, Huobi, OKX, Gate.io, and MEXC were banned for noncompliance with Indian regulations earlier in January. Chaudhary confirmed that there are no immediate plans to introduce legislation for regulating virtual digital asset transactions within the country. India has been actively advocating for coordinated efforts among G20 nations to combat illicit crypto activities globally during its 2023 presidency. In a recent development, the Directorate General of Goods and Service Tax Intelligence (DGGI), an Indian law enforcement agency, demanded 722 crore Indian rupees ($86 million) in unpaid taxes from Binance, hindering its reentry into the Indian market. Despite facing challenges with tax compliance, Binance appointed local counsel to address its tax obligations. The Indian government's approach signals a focus on tax enforcement and anti-illegal finance measures rather than direct regulation of crypto transactions.