India’s Crypto Industry Pushes for Tax Cuts as New Delhi Warms Up to Once Shunned Sector

The cryptocurrency sector in India is lobbying for tax reductions that currently limit domestic trading, aiming to leverage New Delhi’s softer stance on digital assets amid ongoing trade negotiations with the United States. Once treated with suspicion due to concerns over illicit activities, India’s policymakers are gradually thawing towards crypto, signaling a new era for the industry.

Government’s Changing Attitude Toward Crypto

Previously marginalized in India over fears of criminal misuse, the government’s approach to cryptocurrencies has evolved significantly. Executives from major exchanges told the Financial Times that the administration under Prime Minister Narendra Modi has become noticeably more open and engaged since Donald Trump’s return to the White House and his acceptance of digital currencies.

Ashish Singhal, co-founder of CoinSwitch—one of India’s largest crypto exchanges with over 20 million users—reported that industry meetings with policymakers have increased from roughly once every six months to monthly or even weekly. The industry’s key demand is the reduction of what Singhal calls “very harsh” taxes.

The Impact of Current Taxation Policies

The existing measures include a 30% capital gains tax and a 1% tax on every crypto transaction, implemented in 2022 to help authorities track and combat illicit activities. However, a study by New Delhi-based Esya Advisory Center found that these taxes have pushed more than 90% of Indian digital asset trading overseas.

“Thanks to Trump, positive momentum in crypto has also influenced India,” said Singhal. He suggests a transaction tax of 0.1% could achieve similar traceability goals without discouraging trading. “Regulators are now talking to us more closely and understanding what this space really is.”

Return of Global Crypto Giants

Binance and Coinbase, the world’s two largest crypto exchanges, which had exited India, are now returning. Both are eager to capture market share in the world’s most populous country, where the crypto market is expected to grow from $2.5 billion last year to over $15 billion by 2035, according to accounting firm Grant Thornton.

“Competition is definitely heating up,” said Kush Wadhwa, a partner at Grant Thornton India. “India has no choice but to adopt crypto, but their concern is money laundering and tax evasion — they don’t say ‘don’t do it’, but they want to control it.”

Policy Developments and Industry Concerns

Following Trump’s January inauguration, India’s Economic Minister Ajay Seth announced plans to revise a key crypto policy document. However, after India’s February budget, the Bharat Web3 Association’s lobby group expressed disappointment over the absence of any announced crypto tax relief.

“Taxation is a major concern,” said Naga Harish, senior associate at Bengaluru-based exchange Mudrex. “It feels like a deal-breaker.”

After gaining important regulatory approvals this year, Coinbase’s International Policy Vice President Tom Duff Gordon noted Trump’s return is driving global industry momentum. The Indian government is increasingly realizing, “You can’t just switch it off, you can’t ban it.”

RBI’s Position and Regulatory Outlook

India’s central bank, the Reserve Bank of India (RBI), remains the sector’s strongest critic. In 2022, an RBI deputy governor likened crypto to “Ponzi schemes.” The bank previously banned banking services to crypto firms in 2018, a move overturned by the Supreme Court in 2020.

More recently, in December, the RBI warned that crypto adoption could have “consequences” for economic and financial stability. Yet, the new governor, Sanjay Malhotra, has refrained from direct criticism, awaiting a government-led industry report.

Singhal said relations with the RBI have shifted “from negative to neutral,” though “we’re probably still a few years away from appropriate regulation, which could help the industry grow further.”

Changing Public Perception

Suril Desai, head of disruptive technology at Nishith Desai Associates—a law firm that successfully challenged the RBI’s banking ban—highlighted another challenge: changing Indian public perception about crypto.

“Most people in India still think it’s illegal,” he said, though he noted many young individuals from wealthy families are adopting digital assets. “They have family offices and tell their parents to buy crypto.”

Conclusion

India’s cryptocurrency industry stands at a pivotal moment. With the government’s evolving stance, increased industry engagement, and the return of global players, there is cautious optimism that tax reforms and clearer regulations could unlock significant growth. However, overcoming regulatory skepticism and public misconceptions remains key to fully realizing India’s crypto potential.

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