Why crypto is a favourite investing option in India despite the lack of clear regulations

Indians love crypto. Here are some numbers to elucidate: A report by the OECD, released in June 2026, highlights that India, along with Korea, received the largest absolute flows into crypto assets in the 12 months to June 2025.

Again, at last count in 2026, 50 crypto exchanges were registered with the Financial Institution Unit-India, a central agency responsible for information related to financial transactions. Ashish Singhal, Co-Founder, CoinSwitch, pegs the number of crypto investors between 70 million and 90 million, although the number of active participants will be significantly lower.

Prateek Gupta, Head of Business, Mudrex, a crypto trading platform, says as per data from the finance ministry, the value of India’s Virtual Digital Asset (VDA) transactions was Rs 1,09,580 crore from FY23 to FY25, growing 131% cumulatively. While investors in the age group of 18-45 are seen to have a high risk appetite, the number of new investors in younger age groups, especially from smaller towns, continues to rise.

Nischal Shetty, Founder, WazirX, says a majority of traders are in the 20-30 year bracket. Overall, crypto investors are in the 25–45 year age group. The Crypto Trends Report for H12026 by WazirX India, released in July 2026, says over 82% users come from non-metro cities, with a typical investor being a 34-year-old working professional.

This was also highlighted in a August 2026 report by CoinSwitch, India’s Crypto Portfolio: How India Invests in Q2 2026, which said nearly three in four Indian crypto investors were under 35 years and 54.4% new investors belonged to the 18–25 age group in the second quarter of the fiscal. Uttar Pradesh (12.9%) and Maharashtra (12.4%) were India’s largest crypto markets, it said.

This sentiment for investing in crypto is despite the lack of clear regulations. As per a recent report by blockchain analysis firm Chainalysis, India is number one in crypto adoption. Though there is no precise estimate of the number of users, the popularity of crypto is unabated.

Singhal says younger investors, in particular, are comfortable with digital-first financial products and see crypto as an avenue to participate in a global, technology-led economy. “We are seeing investors becoming more informed and diversified in how they approach the asset class. Beyond returns, factors such as growing institutional participation, improving compliance standards and greater regulatory clarity are helping build confidence,” he says.

Asset diversification is another reason Indian investors are choosing crypto, says Gupta of Mudrex. “It is not only the returns, which can be widely volatile, but the technology as well, which is of value, and should be the main reason for investing,” says an established blockchain validator and DeFi (decentralised finance) investor who goes by the username Fiery Dev.

But he warns that it can be a difficult journey and expecting huge returns every day will lead to pain. Unlike stock markets, the crypto market is unregulated. There are no circuit breakers and no preventive measures against market manipulation, he says.

Should India frame detailed regulations for investor safety, as many countries have done?

LONG, TRICKY ROAD

It’s not easy to invest in cryptocurrencies in India even though there is no formal ban. In March 2020, the Supreme Court struck down a 2018 circular by the Reserve Bank of India (RBI) that prohibited regulated entities from dealing in virtual currencies or providing services for facilitating any person or entity in dealing with or settling these. In effect, the Supreme Court ruling allowed banks and financial institutions to process such transactions.

With cryptocurrencies, especially Bitcoin, seeing huge demand globally, India, too, followed. Several exchanges set up shop and thousands of investors started investing. The Covid-19 pandemic saw a further increase in investment but investor interest started waning with security concerns at several exchanges as well as a sharp fall in the value of most cryptocurrencies in 2022. Several use cases, including the much-touted non-fungible tokens (NFTs), also did not meet expectations.

In India, too, the concerns continued to mount. The RBI has made it clear that it remains opposed to virtual assets due to concerns over financial stability. There are also worries about the notional value of the technology. R. Gandhi, former RBI deputy governor, says concerns are about crypto being a liquidity source that is uncontrollable, unmeasurable, and lacking transparency and accountability.

To give a more stable alternative to users, the RBI launched the Central Bank Digital Currency (CBDC), popularly known as the Digital Rupee, in 2022, based on components of blockchain and similar technologies. Pilot studies on both wholesale and retail CBDC continue. “In a way, RBI’s CBDC is India’s stablecoin. India can explore privately issued stablecoins also. It would need to be subjected to regulation. To begin with, banks can be permitted to issue stablecoins,” says Gandhi. Stablecoins are cryptocurrencies designed to keep a steady value by linking to a reserve asset like the US dollar.

Most major banks continue to stay away from dealing in virtual currencies and only a few smaller ones process such transactions. With concerns over illicit usage of virtual currencies mounting, tax authorities have also tightened rules for reporting such transactions and brought in stiff taxes to disincentivise crypto trading. The Union Budget 2022-23 introduced a flat 30% tax along with cess and surcharge on any income from transfer of virtual digital assets. Losses from such transactions cannot be set off against any other income or carried forward. It also introduced a 1% TDS on transfer of virtual digital assets on value of the sale.

Shetty of WazirX says more trading now takes place in the derivatives market. “Compared to 2020-21, there has been a decline in volumes around crypto trading in spot markets in India because of the 1% TDS. About 90-95% volume evaporated from Indian markets after the announcement of the taxation in Union Budget 2022. But the 1% TDS does not impact long-term investors,” he says.

Gupta of Mudrex quotes KoinX data for FY25, which shows that nearly 73% of Indian crypto trading volume has migrated to offshore platforms. There’s also an 18% GST on services provided by cryptocurrency exchanges to investors.

Additionally, there are numerous reporting requirements under direct tax laws, and exchanges have to register with FIU-Ind to comply with anti-money laundering laws.

In July this year, the Central Board of Direct Taxes issued a guidance note on the Crypto-Asset Reporting Framework of the OECD, which will be applicable from 2027.

Sources say there is a thriving cash market for crypto trading as several people invest abroad. There are also cases on investors transferring VDAs oversees and then sending them gift cards in exchange that can be used in India.

Aditya Bhattacharya, Partner, King Stubb & Kasiva, Advocates and Attorneys, says the industry has been asking for relief on 30% tax and 1% TDS. “That has not changed. What has changed is how tightly the net is being pulled. Exchanges now face real penalties if they mess up reporting, starting this April, and by 2027, India will join this global framework called CARF, which means the taxman will start seeing your offshore wallets and foreign trades, too. So, people who thought moving to an international exchange kept them under the radar are going to be in for a surprise.” He says this tax structure is punishing anyone who trades a lot.

Several developers have moved to countries like the UAE and Singapore to build products and run exchanges from there.

REGULATORY NEEDS

Despite official warnings and obstacles to trading, the huge interest in cryptocurrencies remains unabated in India. Globally also, regulatory concerns over cryptocurrencies persist, but several countries have either barred such investments or developed regulatory frameworks.

Singhal says globally, developments across the US, the UAE, the EU, and other markets are creating a more structured environment and supporting the next phase of growth.

In 2021, China banned trading in crypto assets. The US, under President Donald Trump, enacted the GENIUS (Guiding and Establishing National Innovation for U.S. Stablecoins Act) Act in July 2025 that establishes a regulatory framework for payment in stablecoins.

More recently, the US Securities and Exchange Commission also proposed new rules, titled “Regulation Crypto Assets”, to create a clear and fit-for-purpose framework for certain contracts involving crypto assets. The Trump family-backed World Liberty Financial crypto venture’s trust company has got a conditional approval to launch a bank.

Driven by positive sentiments, bitcoin prices crossed the $80,000-mark for the first time since May 2026 and touched $81,235 on August 25.

In India, a formal regulation is still awaited, though a lot of thought and work has been put into it.

In 2019, an interministerial committee chaired by Secretary, Department of Economic Affairs, with Secretary, MeiTY, Sebi Chairman, and RBI Deputy Governor as members had recommended banning cryptocurrencies in India and imposing penalties for carrying related activities. It had also submitted a draft bill called ‘Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019’.

Since then, there has been little further action on the ground. A second report by the Department of Economic Affairs on cryptocurrencies has been on the backburner for some time now.

The finance ministry has, however, cautioned that crypto products and NFTs are unregulated and can be highly risky. “There may be no regulatory recourse for any loss from such transactions,” it has warned. FIU-Ind has now issued notices for non-compliance to 15 VDA service providers and has also directed them to take down the application and URLs for public access, which have been found to be operating illegally.

The OECD Asia Capital Markets Report 2026 highlights the concerns over cryptocurrencies noting that the “growing interconnectedness between crypto-asset and traditional financial markets creates risk of contagion”. Use of crypto assets for illicit finance, cyber-security threats, and lack of consumer protection and awareness are some of the challenges it has underlined.

Crypto exchanges in India, however, underline that they are working on self-regulation led by industry body Bharat Web3 Association. Shetty of WazirX notes that there is some progress in regulatory clarity in terms of taxation, KYC and AML (anti-money laundering) through FIU registration. “There is work and progress, though slower than in other countries,” he says.

The Parliamentary Standing Committee on Finance has also been looking into the issue of virtual digital assets. In its report on the Securities Market Code, 2025, it has noted that exclusion of these assets from the definition of securities creates a regulatory grey area and has recommended that the government comprehensively examine the need for an appropriate statutory and regulatory framework.

In the interim, the government may consider introducing a mechanism through recognised Self-Regulatory Organisations operating under the oversight of the designated regulator, it has suggested. The committee is also holding separate discussions on virtual digital assets and the way forward, and its report is expected in the winter session of Parliament.

Sources indicate that while its deliberations are underway, it may consider recommending strict curbs on these assets.

Globally, stablecoins are being used for activities like lending and trading as well as for payments and remittances. A Bank of America Institute report from October 2025 noted that from cross-border to retail transactions, stablecoins can be a cheaper and more efficient option when compared to other methods. “However, they also introduce challenges,” it had said.

With new use cases emerging and adoption continuing, cryptocurrencies have stood the ground so far, though the initial excitement may have ebbed. A clear regulatory framework—in whatever form and stance—would help protect retail investors and give clarity to the industry.

@surabhiprasad