India, a country that is well known for its hard stance and skepticism towards crypto, is facing pressure to also change its regulatory policy regarding crypto less they lose out.
Speaking to Reuters, India’s Economic Affairs Secretary, Ajay Seth, acknowledged that crypto “doesn’t believe in borders,” suggesting that the country does not want to get left behind in the digital asset revolution.
Striking a Balance Between Regulation and Innovation
This potential shift follows India’s stringent tax policies on crypto, including a newly imposed tax of up to 70% on undisclosed crypto gains under the Income Tax Act.
Additionally, all digital asset transactions are subject to a 30% capital gains tax, regardless of whether they are long-term investments or short-term trades.
Legal experts have criticized these measures, warning that they stifle blockchain innovation. Supreme Court advocate Amit Kumar Gupta described the policies as excessively harsh and an attempt to discentivise the development of permissionless blockchain technology.
"Their stance is that we are not going to use or allow anyone to use cryptocurrency because this technology is only for money laundering and terror funding-these kind of activities."
India’s Focus on CBDCs Over Decentralized Crypto
Despite its reservations about decentralized cryptocurrencies, India is actively developing a central bank digital currency (CBDC). Former Reserve Bank of India (RBI) Governor Shaktikanta Das, a strong proponent of CBDCs, described them as “the future of currency” in his December 2024 farewell speech.
Under his leadership, the RBI launched a CBDC pilot program and expanded cross-border payment initiatives, positioning CBDCs as a key tool for international transactions.
Shortly after his departure, RBI announced plans to expand its cross-border payment platform in November 2024 by seeking additional trading partners.
The bank is investigating the use of CBDCs as the primary settlement method for cross-border transactions, likely implementing a wholesale CBDC within its payment platform.
As global economies embrace digital assets, India faces a pivotal choice—adapt its regulatory framework to foster crypto innovation or risk falling behind in the rapidly evolving financial landscape.