Is crypto legal in India? Rules & regulation (2026)

Legal framework

Patchwork regime: Finance Act 2022 (tax treatment of Virtual Digital Assets), Prevention of Money Laundering Act, 2002 with the 7 March 2023 Ministry of Finance notification bringing VDA service providers under PMLA as reporting entities, and FIU-IND AML/CFT Guidelines (updated 8 January 2026). No comprehensive crypto-specific law is yet in force; a discussion paper is repeatedly delayed and RBI, SEBI and the Ministry of Finance are still debating a multi-regulator framework.

Status by sub-area

• Stablecoins

  None

  No dedicated framework for issuance, reserve backing, redemption or audit of stablecoins. The RBI has publicly opposed both foreign-currency-pegged (as a threat to monetary sovereignty/'dollarization') and rupee-pegged private stablecoins, and continues to promote its own CBDC ('Digital Rupee'/e-Rupee) as the sanctioned alternative.

  Still pending: Private stablecoin framework blocked by RBI; e-Rupee CBDC promoted as alternative

• Exchanges / VASP

  Partial

  Exchanges and other VDA Service Providers must register with FIU-IND under the PMLA (2023 notification) and comply with the 8 January 2026 AML/CFT Guidelines (KYC, live-selfie/liveness, geo-tagging, penny-drop bank validation, delisting of privacy coins and mixers). There is no full prudential licensing regime yet: capital requirements, conduct rules, market-integrity and local-presence rules for exchanges remain in the proposed discussion-paper stage.

  Still pending: Prudential licensing regime (capital requirements, conduct, market-integrity rules) in discussion-paper stage

• Token Offerings

  None

  India has no dedicated ICO/STO regime. There is no crypto-specific prospectus/disclosure framework and no formal SEBI notification granting explicit oversight of token offerings. Regulators apply a 'substance-over-form' test: if a token behaves like a security (dividends, voting rights, profits derived from another's efforts), securities and collective-investment-scheme laws may be applied; utility tokens fall back into the generic VDA/PMLA/tax perimeter.

  Still pending: Dedicated ICO/STO framework with prospectus/disclosure rules and formal SEBI oversight not enacted

• Custody

  None

  There is no dedicated crypto custody law in India. Custodial wallet providers and centralised exchanges qualify as VASPs under the PMLA and must satisfy FIU-IND AML/CFT obligations, but there is no qualified-custodian regime, no statutory client-asset segregation rule, no proof-of-reserves mandate and no insurance requirement specific to VDAs. Investor-protection custody norms are being proposed but not yet enacted.

  Still pending: Investor-protection custody norms being proposed but not yet enacted; no qualified-custodian regime

• DeFi

  None

  DeFi operates in a regulatory grey zone. Indian law does not distinguish DeFi protocols, front-ends or DAOs from centralised intermediaries; existing payment-system, securities, PMLA and tax laws are applied where a nexus exists, but there is no crypto-specific DeFi regime. A government discussion paper is expected in late 2026 to address DeFi and staking, but nothing is currently in force.

  Still pending: DeFi/staking regulatory framework; government discussion paper expected late 2026

• Tax

  In force

  Tax rules are fully in force. Section 115BBH of the Income-tax Act (Finance Act 2022) imposes a flat 30% tax (plus applicable cess/surcharge) on gains from the transfer of any Virtual Digital Asset, with no distinction between short- and long-term holdings. Only cost of acquisition is deductible; losses cannot be set off against any other income or carried forward. Section 194S imposes 1% TDS on VDA transfers (threshold ₹50,000/₹10,000). VDA transactions and holdings must be reported in 'Schedule VDA' of the ITR.

Key points: crypto & digital assets in India

1. 01Legal but not legal tender

   Crypto is not recognized as currency; it is legally defined as a 'Virtual Digital Asset' (Section 2(47A) of the Income-tax Act, inserted by Finance Act 2022). Residents may buy, hold and sell VDAs on compliant platforms.

   incometaxindia.gov.in

2. 02PMLA/FIU-IND AML regime

   The Ministry of Finance's 7 March 2023 notification brings VDA service providers (exchanges, transfers, custody, issuance) under the Prevention of Money Laundering Act as 'reporting entities'; they must register with the Financial Intelligence Unit-India and comply with KYC, transaction monitoring and STR obligations. Updated AML/CFT Guidelines were issued on 8 January 2026.

   fiuindia.gov.in lexology.com

3. 03Supreme Court reversed 2018 banking ban

   The Supreme Court in Internet & Mobile Association of India v. RBI (4 March 2020) struck down the RBI's April 2018 circular that barred regulated entities from servicing crypto businesses, holding it disproportionate under Article 19(1)(g). No equivalent ban has been reinstated.

   azbpartners.com cms.law

4. 04Comprehensive law still pending

   No dedicated crypto statute or licensing regime is in force. The much-anticipated inter-ministerial discussion paper has been delayed multiple times, with the RBI reportedly pushing for prohibition while SEBI has proposed a multi-regulator split (SEBI for security-like tokens, RBI for cross-border flows, MoF for policy/tax).

   cryptotimes.io globallegalinsights.com

5. 05Parliamentary scrutiny in 2026

   The Parliamentary Standing Committee on Finance summoned the RBI and ICAI on 2 July 2026 for a study titled 'Virtual Digital Assets and Way Forward', reflecting active legislative debate rather than a settled framework.

   cryptotimes.io

6. 06Registered exchange market

   As of the FIU-IND FY2024-25 Annual Report, 49 Virtual Digital Asset Service Providers were registered — 45 domestic and 4 offshore (including entities such as Binance and KuCoin that returned after AML penalties). India has ~39 million retail crypto holders holding roughly USD 2.1 billion in digital assets.

   fiuindia.gov.in coingape.com

Timeline of decisions

1. 11 Sept 2026Enforcement
   India starts tokenizing $620 billion corporate bond market with digital rupee settlement

   CoinDesk Policy

2. 9 Sept 2026Decision
   India seeks takedowns of 15 crypto platforms over AML compliance

   The Block

3. 24 Jul 2026Decision
   India orders takedown of Jack Dorsey’s bitcoin-linked messaging app Bitchat

   CoinDesk Policy

4. 8 Jul 2026Decision
   India central bank seeks to bar financial institutions from exposure to crypto assets: Reuters

   The Block

5. 8 Jul 2026Decision
   Reserve Bank of India still favors crypto prohibition to curtail tax evasion: Reuters

   CoinDesk Policy

6. 29 Jun 2026Decision
   Tether's USDT jumps to 8.5% premium in India after crypto payment crackdown

   CoinDesk Policy

7. 16 Jun 2026Enforcement
   India files charges against 8 defendants in alleged $20 million Coinbase spoofing scam

   The Block

8. 1 Jun 2025Guidance
   Government signals crypto policy discussion paper (DEA-led)

   A Department of Economic Affairs-led working group (with RBI, SEBI and the Finance Ministry) prepared a public discussion paper to classify crypto assets and frame regulation, drawing on the IMF-FSB roadmap; release slipped and the paper remained unpublished. It signals India's intent to move from ad-hoc taxation/AML measures toward a comprehensive framework.

   Business Standard

9. 1 Jun 2024Enforcement · official
   Binance registers with FIU-IND after record ₹188 crore penalty

   After being blocked, Binance registered as a reporting entity with India's Financial Intelligence Unit and paid a ~₹18.82 crore/₹188 crore-class penalty (about US$2.25 million) for PMLA non-compliance, India's largest crypto penalty, and resumed Indian operations. It established that offshore exchanges must comply with Indian AML law to serve Indian users.

   FIU-IND

10. 28 Dec 2023Enforcement · official
    FIU-IND issues show-cause notices to 9 offshore exchanges

    FIU-IND issued compliance show-cause notices to nine offshore VDA service providers, including Binance, KuCoin, Kraken, Huobi and Bitfinex, for operating without PMLA registration, and asked MeitY to block their URLs. It marked India's first hard enforcement against unregistered foreign crypto platforms.

    Press Information Bureau / FIU-IND

11. 7 Sept 2023Guidance · official
    IMF-FSB synthesis paper on crypto policy under India's G20 presidency

    At the request of India's G20 presidency, the IMF and FSB published a joint synthesis paper and roadmap for regulating crypto assets, which G20 finance ministers adopted. It anchored India's stance that crypto needs coordinated global rules rather than a unilateral ban.

    Financial Stability Board

12. 7 Mar 2023Law
    Crypto brought under the Prevention of Money Laundering Act

    A Ministry of Finance gazette notification classified VDA service providers (exchange, transfer, custody, and financial services around VDAs) as 'reporting entities' under PMLA, 2002, mandating FIU registration, KYC and suspicious-transaction reporting. This put crypto businesses under India's formal AML supervision for the first time.

    AZB & Partners (on MoF S.O. 1072(E))

13. 1 Dec 2022Decision · official
    RBI launches retail Digital Rupee (e₹-R) pilot

    The RBI began its first retail central bank digital currency pilot in select cities with eight banks, issuing a token that is legal tender. It established a sovereign digital-currency alternative the state favours over private crypto.

    Press Information Bureau / RBI

14. 1 Feb 2022Law
    Budget 2022 imposes 30% tax and 1% TDS on virtual digital assets

    The Finance Act 2022 inserted Section 115BBH (flat 30% tax on VDA gains, no loss set-off) and Section 194S (1% TDS on transfers, effective 1 July 2022), plus a statutory VDA definition. By taxing rather than banning crypto, it gave digital assets de facto legal recognition while imposing one of the world's harshest tax regimes.

    ClearTax (on Finance Act 2022)

15. 29 Nov 2021Law
    Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 listed

    The government listed a bill to bar most private cryptocurrencies while enabling an RBI digital currency for Parliament's winter session, but it was never introduced or passed. The episode reflected the government's unresolved swing between banning and regulating crypto.

    PRS Legislative Research

16. 4 Mar 2020Decision · official
    Supreme Court quashes RBI's banking ban on crypto (IAMAI v. RBI)

    A three-judge bench struck down the RBI's 2018 ban on banks servicing crypto businesses as disproportionate under Article 19(1)(g). The ruling revived crypto trading in India and is the foundational judgment establishing crypto's lawful status absent legislation.

    Supreme Court of India

17. 6 Apr 2018Guidance · official
    RBI bars regulated entities from dealing in virtual currencies

    The RBI directed all banks and regulated entities to stop providing services to anyone dealing in virtual currencies and to exit existing relationships, effectively cutting crypto off from the banking system. This circular triggered the litigation that reached the Supreme Court.

    Reserve Bank of India

18. 24 Dec 2013Guidance · official
    RBI issues first public caution on virtual currencies

    The RBI warned holders and traders of Bitcoin and other virtual currencies of financial, legal, operational and security risks, noting it had licensed no entity to deal in them. It was India's first official regulatory statement on crypto and set a cautious tone for years to come.

    Reserve Bank of India

Sources

1. 1.incometaxindia.gov.in/documents/20117/42998/Taxation-of-Virtual-Digital-Asset-VDA_2026-01-0
2. 2.fiuindia.gov.in/
3. 3.azbpartners.com/bank/supreme-courts-judgment-on-virtual-currencies/
4. 4.globallegalinsights.com/practice-areas/blockchain-cryptocurrency-laws-and-regulations/india/
5. 5.cryptotimes.io/2026/04/01/indias-crypto-policy-delayed-again-as-rbi-blocks-discussio
6. 6.cryptotimes.io/2026/06/26/indias-parliament-finance-committee-to-hear-rbi-icai-on-vd
7. 7.lexology.com/library/detail.aspx?g=3c87e736-ce31-46e8-b730-0179c5b809fc
8. 8.cms.law/en/int/legal-updates/Supreme-Court-of-India-lifts-ban-on-cryptocurren
9. 9.coingape.com/rbi-leans-toward-crypto-ban-despite-india-boasting-39-million-traders