Explained: What to Expect in India’s Upcoming Crypto Discussion Paper?

 

India's crypto industry is anticipating the release of a crypto discussion paper by the Indian government, which is expected to outline the country's crypto policy[1][2]. This reassessment comes as global regulatory frameworks for cryptocurrencies are gaining traction, and there's a growing concern that India might fall behind in the crypto and Web3 sectors without clear regulations[1].

**What is India’s Crypto Discussion Paper?**

The discussion paper is intended to solicit feedback from industry stakeholders on the ideas presented in it[2][3]. The Indian government intends to use these suggestions to inform its policy stance on crypto[2]. The paper is being prepared by the Finance Ministry, the Reserve Bank of India (RBI), and the Securities and Exchange Board of India (SEBI)[2][5]. The government also intends to discuss the policy implications with various stakeholders, which may include crypto exchanges and businesses[2][5].

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Currently, India does not regulate cryptocurrencies; instead, they are categorized as Virtual Digital Assets (VDAs) and are viewed through the lens of Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF)[2][5]. The recent amendment to the Finance Bill 2025 defines crypto-assets as "a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions," effective April 1, 2026[2].

**Why was the Crypto Discussion Paper Delayed?**

The release of the discussion paper has been delayed, despite initial promises from the Indian government to deliver it in 2023, and then by September 2024[2]. Ajay Seth, Secretary of the Department of Economic Affairs (DEA), attributed the delay to changes in the stance of different countries on crypto since the G20 meet[2][5]. India had an apprehensive stance against cryptocurrencies, especially stablecoins, until the G20 meet[2]. However, recent events, such as endorsements of crypto by global leaders, have prompted a change in stance[2][5]. The government is now considering whether crypto could be a way forward for cross-border payment settlement systems[2][5].

**What to Expect?**

The crypto discussion paper is meant to establish a framework for how cryptocurrencies will be regulated in India[5]. The paper is anticipated to alleviate concerns within the crypto community and pave the way for policies that could bring legitimacy and stability to digital assets[5]. This, in turn, could create a more favorable environment for investment and innovation, which is essential for the growth of the fintech sector[5].

A clearer regulatory framework may be on the horizon, potentially easing the current high tax rates on crypto transactions, which include 30% on profits and a 1% Tax Deducted at Source (TDS) on transactions exceeding ₹50,000[5]. A more favorable tax structure could attract investment and promote innovation, making India a more attractive destination in the global fintech landscape[5]. The paper may also address compliance challenges and provide guidelines for AML and CTF regulations, simplifying processes for businesses and investors[5].

**Learning from Other Countries**

India can draw lessons from other countries that have successfully integrated cryptocurrencies into their financial systems[5]. For instance, the EU's Markets in Crypto-Assets (MiCA) regulation offers a balanced framework that protects investors while encouraging innovation[5]. El Salvador's adoption of Bitcoin as legal tender provides insights into the practical aspects of using cryptocurrencies[5]. Additionally, South Korea's strict regulatory measures ensure that digital asset managers and exchanges operate within secure and transparent frameworks[5]. By studying these models, India could develop a robust regulatory environment that supports the growth of its cryptocurrency market while maintaining financial stability[5].

**India's Current Crypto Tax Structure**

India has not made any changes to its tax structure on crypto in the latest budget for 2025[2]. Crypto gains continue to be taxed at 30%, with a 1% tax deducted at source (TDS)[2]. However, the government has introduced a sub-clause in the recently amended Finance Bill that broadens the scope of virtual digital assets (VDAs) to include "crypto assets"[2]. Despite not regulating cryptocurrencies, India’s Finance Minister, Nirmala Sitharaman, has justified taxing them, stating that taxes must be paid even on "black money" (undisclosed income)[2].