India's Evolving Crypto Regulatory Framework: Unlocking Investment Opportunities in Resilient Blockchain Infrastructure Providers

India's crypto regulatory landscape has undergone a seismic shift in 2025, transitioning from ambiguity to a structured framework that balances innovation with compliance. As the government tightens oversight under the Prevention of Money Laundering Act (PMLA) and introduces technology-driven AML/KYC protocols, blockchain infrastructure providers are emerging as pivotal players in shaping a resilient digital economy. For investors, this regulatory evolution presents a unique opportunity to capitalize on companies that align with India's strategic vision for blockchain adoption while navigating compliance demands.

A Regulatory Framework Rooted in Compliance and Enforcement

The Indian government's 2025 regulatory updates have redefined the crypto ecosystem. Virtual digital asset service providers (VASPs) are now classified as "reporting entities" under PMLA, mandating strict AML and KYC compliance. By March 2025, 49 crypto exchanges had registered with the Financial Intelligence Unit (FIU), including 45 domestic and four offshore platforms. Non-compliant entities faced significant penalties, with ₹28 crore ($3.1 million) in fines issued, including a ₹9.27 crore penalty on Bybit for violations. These enforcement actions underscore the government's commitment to curbing illicit activities while fostering a transparent environment for legitimate crypto activity.

Technology-based onboarding measures, such as liveness detection via live selfies, geolocation tagging, and multi-factor authentication, have further strengthened compliance. Additionally, anonymity-enhancing tools like tumblers and mixers are explicitly barred, reducing risks of misuse. These measures align India's regulatory approach with international standards, particularly FATF guidelines, while addressing domestic concerns around financial crime.

Tax Policies: Clarity and Compliance Challenges

India's tax regime for virtual digital assets (VDAs) remains unchanged in late 2025, with a flat 30% tax on profits and a 1% Tax Deducted at Source (TDS) for transactions exceeding ₹50,000 for individuals and ₹10,000 for non-individuals. The introduction of Schedule VDA in the Income Tax Return (ITR) has streamlined reporting, requiring taxpayers to disclose all crypto gains and losses. However, losses cannot be offset against gains from other sources or carried forward, creating a one-way risk for investors.

The government's emphasis on compliance is evident in its data-matching initiatives, where exchange records and TDS reports are cross-referenced with taxpayer filings. This has increased audit risks, with penalties ranging from 50% to 200% of the tax due for underreporting. Despite these challenges, the regulatory clarity has spurred demand for compliance tools, with platforms like Cryptact offering automated tax tracking and reporting.

Blockchain Infrastructure Providers: Compliance as a Competitive Edge

The regulatory environment has catalyzed innovation among blockchain infrastructure providers, many of whom are aligning with RBI and SEBI mandates to secure market relevance. Key players are leveraging India's cautious yet forward-looking approach to DLT, as exemplified by the Reserve Bank of India's (RBI) Innovation Hub and the Securities and Exchange Board of India's (SEBI) DLT-based monitoring systems.

1. MSME Financing and CD Tokenization

The RBI's blockchain-based financing platform for micro, small, and medium enterprises (MSMEs), developed by the Indian Banks' Digital Infrastructure Company (IBDIC) Pvt Ltd, has exited the regulatory sandbox and is now operational. This platform tokenizes supplier invoices, enabling lenders to offer affordable credit to MSMEs within supply chains of large firms. Similarly, the RBI's pilot to tokenize certificates of deposit (CDs) using wholesale CBDC rails, launched in October 2025, aims to enhance settlement efficiency and establish a regulated framework for digital assets. These initiatives highlight blockchain's potential to bridge traditional finance with innovation while adhering to regulatory guardrails.

2. National Blockchain Framework and Identity Management

The Ministry of Electronics and Information Technology's (MeitY) National Blockchain Framework (NBF), launched in September 2024, has already verified over 34 crore documents, including academic records and government-issued certificates. Components like the Vishvasya Blockchain Stack and Praamaanik for app verification are positioning India as a leader in secure, scalable governance solutions. The blockchain identity management market, valued at $99.61 million in 2025, is projected to grow to $1,160.49 million by 2031, driven by e-KYC and biometric authentication startups.

3. Tokenization and Cross-Border Solutions

Startups like Polygon and CoinDCX are capitalizing on India's regulatory clarity to expand their offerings. Polygon's Layer-2 scaling solutions enable faster, cheaper transactions, while CoinDCX's focus on compliance and user education has solidified its market position. In the asset tokenization space, companies like Blockchain App Factory and INORU are pioneering real-world asset digitization, including real estate and commodities. Cross-border solutions, led by Ripple and Fireblocks, are streamlining international payments for Non-Resident Indians (NRIs), aligning with FEMA and RBI guidelines.

Funding and Market Resilience

Despite a 48% decline in fintech funding in Q3 2025, blockchain infrastructure providers continue to attract strategic investments. PayU's $35.6 million funding round from Prosus underscores confidence in compliance-driven digital services. Global projects like ECHO ($375 million) and GTreasury ($1 billion) further validate institutional interest in India's blockchain ecosystem. The fintech sector, valued at $150 billion in 2025, is supported by government-backed initiatives like UPI and Aadhaar, which have accelerated digital adoption.

Investment Outlook: Navigating the Regulatory-Compliant Ecosystem

For investors, the key lies in identifying blockchain infrastructure providers that demonstrate regulatory agility and technological innovation. Companies like IBDIC, which have successfully navigated RBI sandboxes, and startups leveraging the NBF for identity solutions, offer compelling long-term potential. Additionally, platforms involved in asset tokenization and cross-border payments are well-positioned to benefit from India's $1.5 trillion digital assets market by 2030.

However, challenges persist, particularly in decentralized finance (DeFi) and hybrid models, where regulatory clarity remains limited. Investors must prioritize firms with transparent compliance frameworks and active participation in RBI/SEBI pilot projects. As India's regulatory environment matures, the most resilient blockchain providers will be those that align with the government's vision of responsible innovation while addressing compliance complexities head-on.

Conclusion

India's 2025 regulatory framework has transformed the crypto landscape into a compliance-driven, innovation-focused ecosystem. While the tax and enforcement measures add operational costs, they also create a fertile ground for blockchain infrastructure providers that prioritize regulatory alignment. For investors, the path forward lies in supporting companies that not only adapt to these changes but also drive the next wave of financial inclusion and digital transformation in India.