India Government to Review Virtual Digital Asset Rules, Implications for Retail Investors Explained

Key TakeawaysIndia is conducting a full review of its crypto frameworkIndia's crypto market expected to grow to over $15 billion in the next 10 yearsHowever, RBI maintains cautious stance as it wants to prioritize financial stability  India’s government is undertaking a full-scale review of its Virtual Digital Asset (VDA) framework. The reassessment spans licensing, consumer protection, stablecoin oversight, taxation, and market monitoring. Despite current regulatory ambiguity, crypto trading volume in India remains robust. From July 2024 to June 2025, cumulative trading volumes reached $300 billion, underscoring the resilience of the Indian market. According to a Reuters report, trading on India’s four largest exchanges more than doubled to $1.9 billion in Q4 2024. The long-term outlook for the wider crypto market in India is also promising, as it is expected to grow to more than $15 billion in 2035 from $2.5 billion last year at a compound annual growth rate of 18.5%. Government Begins Full Review of India’s VDA RulebookStronger User ProtectionThe new framework is expected to introduce more stringent protections for everyday users. This includes clear rules requiring exchanges to segregate customer funds, maintain transparent disclosures on reserves and custody practices, and establish defined liability structures for service failures. Authorities also want to mandating formal grievance-redressal channels that retail traders can rely on, especially given the scale of India’s user base.For retail investors, these changes would translate into greater security and far fewer concerns about platform insolvency, mismanagement, or opaque fund handling. Licensing and Compliance for ExchangesRather than allowing exchanges to operate in a regulatory grey zone, the government is moving toward a licensing regime. Platforms may soon be required to meet strict thresholds related to audits, KYC compliance, minimum capital, AML controls, and custody standards. This shift mirrors global frameworks like Europe’s MiCA and Singapore’s PS Act.For the everyday trader, this means access to platforms that are more trustworthy, better-capitalised, and monitored with the same scrutiny as conventional financial institutions. Stablecoin OversightStablecoins are likely to face their own rulebook outlining eligibility for issuance, backing requirements, redemption guarantees, and interoperability standards with India’s payment systems. Regulators remain concerned that poorly backed stablecoins could disrupt monetary stability or expose users to sudden de-pegging events.For retail investors, stronger oversight means safer access to the dollar-pegged tokens widely used for trading, hedging, and cross-platform transfers. Taxation ReviewThe government is also re-evaluating the existing 30% capital-gains tax and 1% TDS on every transaction. Although no changes have been confirmed, any adjustment could dramatically improve trading efficiency and reduce friction for retail users, who often struggle with the cumulative cost of TDS deductions. Enhanced Market MonitoringThe planned framework also prioritizes building a more robust monitoring system. Authorities want tighter reporting from exchanges, improved AML data-sharing, and greater transparency around token listings. This would help reduce fraud, wash trading, and misleading project claims, which are risks that disproportionately affect new traders entering the crypto market. RBI’s Cautious PositionWhile the finance ministry and digital agencies show an appetite for structured regulation, the Reserve Bank of India continues to warn that legitimising crypto could pose risks to financial stability and monetary policy. This divergence suggests that India’s final framework will prioritise safety and oversight rather than free-market liberalisation. What it Means for Retail InvestorsFor India’s growing base of everyday crypto users, the implications are significant:Safer, licensed platforms that handle customer assets with transparencyBetter recourse in the event of fraud, mismanagement, or platform failureGreater institutional participation, which typically leads to better liquidity and more regulated investment products