Bitcoin News Today: India's Crypto Crossroads: Stability vs. Innovation as Global Markets Surge

India has intensified its criticism of unbacked cryptocurrencies, aligning with its central bank's strategic focus on developing a state-backed digital currency. The Securities and Exchange Board of India (SEBI) reiterated that any regulatory decisions on crypto assets must originate from the federal government, not market regulators, during a recent conference in New Delhi. SEBI Chairperson Tuhin Kanta Pandey emphasized that crypto is not currently classified as a security under existing regulations, leaving the door open for future policy shifts but underscoring the government's central role in shaping the framework .

The Reserve Bank of India (RBI) has consistently warned against the risks posed by private cryptocurrencies, labeling them a threat to financial stability. Instead, the RBI has prioritized the development of a central bank digital currency (CBDC), which is currently in pilot stages for both retail and wholesale transactions. This approach reflects a broader caution toward unregulated digital assets, with policymakers citing the need for global coordination before implementing domestic reforms. The lack of clarity has left crypto exchanges and investors in a regulatory limbo, as the government continues to deliberate on a comprehensive framework .

India's current tax regime for cryptocurrencies remains stringent, with a 30% levy on gains and a 1% tax deducted at source (TDS) on transactions exceeding INR 10,000. The Ministry of Finance has confirmed no immediate revisions to these rules, and approval for Bitcoin or crypto exchange-traded funds (ETFs) is unlikely in the near term. This stance has drawn criticism from industry players, who argue that the lack of regulatory clarity stifles innovation and investor confidence. The absence of a structured regulatory environment has also prompted several crypto firms to relocate operations overseas, with high-profile incidents like the $230 million WazirX hack in 2023 and the recent $44 million CoinDCX theft highlighting vulnerabilities in the sector .

While Indian investors have found alternative routes to access U.S.-listed crypto ETFs-such as BlackRock's iShares Bitcoin Trust (IBIT)-through the Liberalised Remittance Scheme (LRS), these options come with tax challenges. Remittances exceeding INR 7 lakhs incur a 20% tax collection at source (TCS), making such investments less attractive compared to direct trading on Indian exchanges, which face a 30% capital gains tax. Despite these hurdles, some analysts suggest that a small allocation to crypto ETFs, akin to traditional equity ETFs, could offer diversified exposure to the asset class .

The government's reluctance to embrace crypto ETFs contrasts sharply with developments in the United States, where the SEC's approval of spot Bitcoin ETFs has spurred a surge in institutional demand. India's stance, however, appears to prioritize financial stability over innovation, with policymakers emphasizing the risks of unbacked digital assets. This divergence has placed Indian investors at a disadvantage, as they navigate complex tax regimes and limited domestic regulatory support while global markets rapidly evolve.

The path forward for India's crypto sector hinges on the government's ability to balance risk mitigation with fostering innovation. While the RBI's CBDC initiatives signal a commitment to digital finance, the absence of a clear regulatory framework for private cryptocurrencies continues to deter institutional participation. As global regulators refine their approaches, India's policymakers face increasing pressure to define a coherent strategy-one that addresses investor protection, financial integrity, and the potential for crypto to coexist with traditional financial systems.