Key takeaways
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With more than 100 million crypto users, India still lacks a comprehensive virtual digital asset (VDA) law. Existing rules address taxation and AML obligations, but they do not fully cover consumer protection or broader market conduct.
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Issues under discussion include the absence of unified investor-protection rules, unregulated trading practices and concerns that India’s 30% tax plus 1% TDS regime is pushing users to offshore platforms.
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Stakeholders are discussing a risk-based VDA framework, licensing requirements for exchanges and custodians, conduct-of-business standards, RWA-specific regulations and improved data and reporting systems.
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Proposed safeguards include clearer custody norms, defined insolvency procedures, stronger disclosure standards, reserve transparency and closer oversight of leverage and liquidity risks.
India is home to more than 100 million crypto users, many of whom are younger and highly tech-savvy. Yet the country still lacks clear and comprehensive regulations for virtual digital assets (VDAs).
A formal review of VDA policies is now underway. This could shift the current system, which focuses mainly on high taxes and basic Anti-Money-Laundering (AML) rules, toward a stronger framework that prioritizes investor protection.
This article outlines the VDA regulations currently in place in India as of Nov. 24, 2025. It explains what the VDA review involves, highlights the key issues under examination, summarizes the regulatory frameworks being considered and discusses the potential benefits the review could deliver.
How India currently regulates VDAs
In India, the term “VDA” is defined in the Income Tax Act through amendments introduced in 2022. It includes cryptocurrencies, non-fungible tokens (NFTs) and any other digital assets the government may specify. VDAs are not legal tender, but individuals are allowed to buy, sell and hold them.
India applies strict taxes on VDAs, including a flat 30% tax on profits from their transfer and a 1% tax deducted at source on transactions above certain limits. Losses from VDAs cannot be offset against other income.
Since March 2023, companies offering VDA services must register with the Financial Intelligence Unit-India (FIU-IND). They are also required to follow AML and Know Your Customer (KYC) rules under the Prevention of Money Laundering Act.
All VDA service providers in India, including domestic and offshore platforms that serve Indian users, are required to register with the FIU-IND as reporting entities.
However, there is still no comprehensive law to govern VDAs. This gap has created confusion and contributed to an outflow of capital and talent. India’s current approach relies on high taxation and AML requirements, but it does not yet provide full regulation or strong consumer protection.
Did you know? Regulation is one of the fastest-moving areas in global finance. Unlike traditional finance laws that often take years to change, crypto regulations can shift within months.
What India’s VDA review involves
India’s G20 presidency in 2023, along with recommendations from bodies such as the Financial Stability Board, encouraged the country to adopt international standards for crypto regulation.
In May 2025, the Supreme Court highlighted the regulatory gap and called for clearer laws. Following this, the Central Board of Direct Taxes asked stakeholders for feedback on whether a dedicated VDA law is needed.
The review would cover several key areas:
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Balancing innovation with investor protection
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Creating appropriate oversight for different types of VDAs, including trading tokens, stablecoins and tokenized assets
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Aligning with global standards while protecting India’s monetary system and preventing money laundering
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Clarifying the roles of regulators and giving businesses and users greater legal certainty.
Key issues under India’s VDA review
The ongoing review of India’s VDA framework is focused on resolving several core challenges and areas of ambiguity. The goal is to establish a clearer and more robust regulatory system. Here are the key issues under consideration:
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Investor protection: There is no unified law safeguarding crypto investors. Key risks include unclear rules on how exchanges must hold customer funds, a lack of defined procedures if an exchange fails, mis-selling of products and insufficient disclosure standards.
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Market integrity and systemic risks: Regulators are concerned about practices such as wash trading, hidden leverage and the use of offshore platforms. Unregulated stablecoins and decentralized trading could also create risks for India’s financial system.
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Money laundering: Although VDA service providers are covered by Anti-Money Laundering (AML) laws, enforcing these requirements on foreign platforms remains difficult. Decentralized finance (DeFi) also falls outside the scope of current regulations.
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Taxation: The 30% tax and 1% tax deducted at source (TDS), combined with the inability to offset losses, have pushed…
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