India's Crypto: $6.1B Flow, $614M in Tax, and Enforcement Risk

The scale of India's crypto market is now a matter of precise, tracked numbers. In the fiscal year 2024-25, transaction volumes reached ₹51,000 crore ($6.12 billion), marking a 41% year-on-year surge. This growth more than doubled the market size from two years prior, establishing India as a major Asian hub despite the absence of formal regulation.

The primary mechanism for monitoring this flow is the 1% Tax Deducted at Source (TDS). The government collected ₹511.8 crore ($61.42 million) as TDS from trades in that same period, a figure that directly reveals the underlying transaction value. This rule, introduced in 2022, was designed to track activity and ensure reporting, and it has become the key data source for gauging market health.

Yet, the environment remains one of enforced compliance without formal licensing. Crypto service providers are required to register with FIU-IND and follow banking-level KYC and AML regulations. This creates a monitored but unregulated landscape where transactions are visible to tax and enforcement agencies, even as the government maintains that VDAs are unregulated.

The Enforcement Reality: Tracking and Risk

The government's stance is clear: crypto is unregulated, but not untracked. Authorities are actively monitoring and acting on flows through a network of intelligence sharing. Crypto service providers are required to register with the Financial Intelligence Unit – India (FIU-IND) and follow strict AML norms. FIU-IND analyzes suspicious transaction reports and shares actionable intelligence with law enforcement, creating a direct channel for enforcement.

This has led to tangible actions. The Enforcement Directorate has investigated multiple crypto-linked cases under the PMLA, resulting in proceeds of crime worth Rs 4,209.74 crore attached or seized, 29 arrests, and 24 prosecution complaints filed. The Income Tax Department is also stepping up, using data analytics to match transaction data with tax returns and nudging non-compliant taxpayers. This creates a high-risk environment for anyone attempting to operate outside the compliance framework.

Yet, the regulatory uncertainty persists. The government is studying new products like derivatives, with a top tax official stating "the government will tread carefully" before formulating any policy. Meanwhile, the central bank has repeatedly cautioned against crypto risks, and the government leans toward maintaining partial oversight rather than full regulation. This leaves the market in a state of enforced compliance without clear rules, where global exchanges operate after registration but the future of products like derivatives remains unknown.

The Catalyst: Policy Clarity and Market Impact

The market's projected path is clear, but its trajectory hinges on a single variable: policy clarity. The India cryptocurrency market is expected to grow at a 14.3% compound annual rate from 2026 to 2033, expanding revenue from $258.2 million in 2025 to $731.9 million by 2033. This growth is built on a foundation of enforced compliance, but without formal recognition, it operates in a state of arrested development.

The core catalyst for unlocking this potential is any move toward a formal Crypto Bill or a shift in the stance on derivatives taxation. The government's "careful" approach to new products creates a major uncertainty for institutional activity. This hesitation has already redirected participation offshore, with Indian users generating an estimated $5 trillion in trading volume on foreign exchanges in just one year. The economic cost is twofold: lost tax revenue and the outflow of jobs and value creation.

For now, the market's growth is a story of resilience within a compliance-first framework. But the path to the projected $731.9 million revenue requires more than just monitoring. It demands a clear policy intent that moves beyond reporting to define a role for digital assets. Until then, the market will continue to grow, but its full economic contribution will remain offshore.