India tops the world in crypto adoption, but policy remains split between encouragement of state-backed digital currency and caution toward private, unregulated assets.
Summary
India ranks first in the 2025 Global Crypto Adoption Index, with over 100 million users, while policy direction remains under evaluation.
Finance and Commerce Ministers offered differing remarks on crypto in early October, deepening ongoing uncertainty around India’s long-term regulatory approach.
The Reserve Bank of India launched a deposit tokenization pilot within its CBDC framework to expand traceable digital infrastructure in the banking system.
The Financial Intelligence Unit issued notices to 25 offshore exchanges under the Prevention of Money Laundering Act as part of broader compliance enforcement.
India’s crypto direction still unsettled
October 2025 finds India’s stance on crypto again at an inflection point. Within days, two senior ministers delivered messages that differ in tone and intent.
On Oct. 6, Commerce and Industry Minister Piyush Goyal, speaking in Doha during the India Qatar Joint Commission, said India has “not been encouraging cryptocurrency, which does not have sovereign backing or is backed by assets.”
He added that the government plans a digital currency “backed by a Reserve Bank of India guarantee like currency,” intended to ease transactions, reduce paper use, accelerate payments, and ensure traceability.
Goyal clarified that while no outright ban is in place, unbacked or speculative cryptocurrencies will face heavy taxation. “While there is no ban as such, we are taxing it very heavily. We don’t encourage it because we don’t want anybody to be stuck with a cryptocurrency that has no backing,” he said.
A few days earlier, Finance Minister Nirmala Sitharaman offered a more measured view at the Kautilya Economic Conclave. She noted that “innovations like stablecoins are transforming money and capital flows” and warned that nations must “prepare to engage” with evolving monetary systems or risk being left behind.
Since the introduction of India’s strict crypto tax regime in mid-2022, which includes a 30% capital gains tax, a 1% TDS on most transactions, and very limited loss offsets, formal adoption has slowed.
Yet more than 100 million Indians continue to hold or trade digital assets. That scale is one factor behind India’s top ranking in the 2025 Global Crypto Adoption Index by Chainalysis, placing it ahead of the U.S.
RBI extends CBDC logic to deposits
On Oct. 7, the Reserve Bank of India announced a pilot program to tokenize bank deposits, set to begin on Oct. 8. The initiative will operate within the wholesale segment of the central bank digital currency system and aims to convert traditional bank deposits into digital tokens on a regulated ledger.
Chief General Manager Suvendu Pati confirmed during an event in Mumbai that the pilot would involve a limited number of banks. He also mentioned that tokenization of commercial papers and other money market instruments is being examined alongside this effort.
According to Pati, integrity and enforceability are essential in this model, and the risks involved can be managed through appropriate regulatory measures.
The announcement aligns closely with Commerce Minister Goyal’s recent remarks that India will issue a digital currency backed by an RBI guarantee. Both developments place traceability and system-level control at the core of the government’s digital strategy.
Deposit tokenization is not an isolated initiative. It builds on earlier phases of India’s central bank digital currency program. In November 2022, the RBI launched the wholesale CBDC pilot, known as e₹-W, to test interbank and government bond settlements.
The retail version, e₹-R, began a month later in December and was rolled out through selected banks in major cities to support person-to-person and person-to-merchant transactions.
Adoption has expanded gradually. By March 2025, the total value of e₹ in circulation reached ₹1,016 crore, up from ₹234 crore a year earlier. Around six million users across 17 banks have taken part in the pilots.
Even so, usage in the wholesale segment remains limited. As of March 2024, holdings under the CBDC wholesale pilot stood at only ₹8,00,000, marking a clear drop from earlier levels.
The new pilot seeks to address that gap. Bank deposits, which form the foundation of the traditional banking system, will now move onto digital infrastructure within the CBDC framework, enabling traceability, conditionality, and regulatory oversight at the level of core banking operations.
FIU tightens compliance perimeter
In early October 2025, India’s financial intelligence authorities adopted a sharper stance against offshore crypto platforms. The Financial Intelligence Unit issued show-cause notices to 25 offshore Virtual Digital Asset Service Providers under Section 13 of the Prevention of Money Laundering Act.
The notices sought compliance explanations and instructed platforms to take down India-accessible applications or URLs if they remained unregistered. The list included Huione, CEX.IO, BingX, CoinEx, LBank, Paxful, Poloniex, BTCC, ProBit Global, and several others.
According to official statements, 50 VDA service providers have already registered, while others continue to operate without fulfilling India’s anti-money laundering and counter-terrorism financing requirements.
Media estimates placed the combined exposure of the named platforms at more than $9 billion in assets, with daily trading volumes nearing $20 billion. The action stands among the most extensive measures India has taken against foreign crypto exchanges so far.
The decision did not arise in isolation. In 2023, India mandated that all virtual asset service providers register with the FIU as reporting entities, regardless of their location.
Once registered, entities are required to maintain transaction records, report suspicious activity, and conduct customer due diligence. These obligations apply to any platform onboarding Indian users, whether or not it maintains physical operations within the country.
Binance, one of the largest global exchanges, was fined $2.25 million in 2024 for failing to comply. Following the penalty, it reportedly began corrective steps. Coinbase, which exited India in 2022, is considering re-entering the market in 2025 under the updated compliance regime.
Domestic exchanges also faced tighter scrutiny. In August 2025, the Income Tax Department flagged multiple Indian platforms for using customer crypto deposits in lending, staking, or proprietary trading without disclosure or revenue sharing.
The practice raised concerns about custody ethics and client consent. Officials described the issue as exchanges deploying customer assets to earn returns while withholding those profits from users.
Despite mounting regulatory pressure, private crypto activity in India has persisted. Exact measurement remains difficult due to unreported cross-border flows, yet participation has not visibly weakened.
In a recent remark, Zerodha co-founder Nithin Kamath said that Indian crypto firms continue to operate in a “regulatory grey zone,” sustained by access to high-leverage derivatives products.
Reports also indicate that ongoing policy uncertainty is pushing developers and startup teams to relocate abroad. Singapore and the UAE have been cited as preferred destinations for those seeking more predictable regulatory conditions.
Gradualism defines India’s crypto policy path
India now stands at a defining juncture in its digital currency policy. The choice ahead is not between wholesale adoption or outright ban, but between tightening institutional control and creating a controlled environment where private crypto ecosystems can function under defined rules.
One possible route is calibrated liberalization. Under this model, the government could maintain centralized infrastructure through CBDC and tokenization pilots while making space for a regulated private crypto sector. This would involve introducing a tiered licensing system that covers exchanges, wallets, and custodians.
Token classification rules may also be established to separate utility, payment, and security tokens. Regulatory requirements could include disclosure obligations, capital adequacy standards, and user protection frameworks.
In mid-2025, signs appeared of movement in this direction. A government discussion paper on crypto asset regulation was reportedly being prepared, with an initial release planned for June 2025.
However, in September 2025, a government document accessed by Reuters indicated that India might not pursue a comprehensive legislative framework for crypto. The document cited systemic risk as the main concern if crypto were fully integrated into formal finance.
Under this outlook, regulators could continue limiting crypto to specific use cases and user segments while keeping core settlement and payments within central bank infrastructure and licensed intermediaries.
A more assertive path would be gradual exclusion. In that case, financial disincentives such as high tax rates, strict compliance rules, and restricted market access would continue steering users away from unregulated or unbacked tokens.
Over time, these barriers may make private cryptos operationally unsustainable for retail and institutional users, shifting adoption toward officially sanctioned systems such as e₹ or regulated digital assets that align with government priorities.
Each potential path brings its own challenges. Privacy remains the most pressing concern. The technical design of CBDC and tokenization systems must protect user-level privacy while preserving institutional oversight. Ultimately, user confidence will hinge on whether digital money can balance autonomy with accountability.
Interoperability with international platforms and currencies introduces further dilemmas. A digital rupee that cannot connect seamlessly with foreign CBDCs, global stablecoins, or major cross-border payment systems may face limits on global use.
The pattern of India’s response is not new. As with earlier phases of telecom, banking, and internet reform, policy evolution has remained gradual and layered with institutional caution. Progress continues step by step, guided more by risk management than urgency.
The government’s follow-through on the discussion paper, its legislative direction, enforcement consistency, and outcomes from ongoing pilots will ultimately determine how India positions itself in global digital finance.
