For a country that prides itself on leading the digital revolution, India’s relationship with cryptocurrency remains oddly conflicted. Millions of Indians are trading in digital coins, investing in tokens they barely understand, and following global price charts as if tracking cricket scores. Yet, even as crypto quietly embeds itself into the nation’s financial imagination, it continues to exist in a legal vacuum, tolerated, taxed, but never truly accepted.
The government’s approach so far has been to neither ban nor embrace crypto. It classifies these assets as “virtual digital assets”, imposes a flat 30 per cent tax on profits, and deducts one per cent TDS on transactions, a policy that recognises the money flowing through the system but refuses to acknowledge the legitimacy of the system itself. It’s a convenient halfway house: the State gets its share of revenue without having to commit to any real regulatory responsibility.
What this has done, however, is push the market into a strange twilight zone. India now ranks among the top countries globally in crypto ownership, with estimates ranging from 90 to over 110 million users. The sheer scale of participation suggests that the phenomenon can no longer be dismissed as a niche obsession of the tech-savvy or the rich. Young Indians, especially in smaller towns, are taking risks in pursuit of quick gains driven partly by distrust in traditional financial institutions, and partly by the promise of a borderless digital future.
But the problem is the absence of a framework. Without clear rules, investors operate in a market built on speculation and sentiment rather than regulation or transparency. Exchanges sprout and collapse with alarming frequency. Scams flourish in the shadows of this legal grey zone.
The Reserve Bank of India has consistently voiced concerns about cryptocurrencies threatening financial stability. Those fears aren’t unfounded. A decentralised, unregulated digital currency could, in theory, weaken the State’s control over money supply and policy. But India’s response so far has been too defensive, too cautious, more about avoidance than adaptation. By sitting on the fence, India risks missing an opportunity to shape the rules of this new economy rather than merely reacting to it.
The irony is that India has the intellectual and technological capacity to be a global leader in block-chain innovation. From building secure supply chain systems to developing efficient cross-border payments, the possibilities are vast. Yet, innovators find themselves constrained by uncertainty. Policymakers continue to hold endless consultations without concrete outcomes. The result is a slow bleed — of capital, talent, and credibility.
Critics of cryptocurrency are right to point out its dangers: volatility, fraud, speculation, and environmental costs. But pretending it will go away is wishful thinking. Digital assets are not a passing trend; they represent a shift in how value is created and transferred in a global economy that increasingly lives online. The question, therefore, is not whether India should allow crypto, but how it can make it work safely and transparently.
India’s cautious balancing act of taxing without legalising, warning without banning might seem pragmatic in the short term, but it’s unsustainable in the long run. A mature economy cannot thrive on ambiguity. What’s needed is a comprehensive regulatory framework that recognises cryptocurrencies as a legitimate asset class, imposes sensible safeguards, and ensures investor protection. Anything less is a disservice to the millions of Indians already invested, both literally and emotionally, in this digital revolution.
The digital rupee pilot launched by the RBI is a step in the right direction, but it cannot be the only step. A government-backed digital currency and privately held crypto assets can coexist as long as the rules of engagement are clear. India has the chance to set an example for other emerging economies: a model that balances innovation with oversight, freedom with accountability.