Cryptocurrency

What is 'Cryptocurrency'?

A "cryptocurrency" or "crypto" is a digital currency designed to work through a computer network without relying on a government, bank, authority to maintain or provide security for it. Generally, it occurs via the issuance of tokens as a medium of exchange, which are collectively accounted for in a digital ledger, also known as "blockchain". These tokens can then be exchanged via consensus between parties, much like other commodities. The first cryptocurrencies were launched anonymously in 2009-10 by a person who goes by the handle of 'Satoshi Nakamoto'.

Cryptocurrency's legal status is in a grey area. Different countries treat them as assets, securities, or currencies. For example, the European Central Bank treats cryptocurrencies like Bitcoin as decentralized virtual currencies. On the other hand, different agencies in the US treat cryptos uniquely. The Internal Revenue service treats cryptocurrencies as property. Recently, the GENIUS Act has recognized a class of cryptos, known as "stablecoins" as legal tender.

India does not treat cryptocurrency as legal tender. Rather, they are considered virtual digital assets for the purpose of tax laws, and more recently, as property. Per section 115BBH of the Income Tax Act, 1961, virtual digital assets are taxed at 30%, with a 4% educational cess. Further, the Madras High Court recently recognized cryptocurrencies as "property" in the Rhutikumari v. Zanmai Labs Pvt Ltd case. In a bid to digitize, the Reserve Bank of India has also recently introduced the Central Bank Digital Currency (CBDC), also known as the Digital Rupee, which is seen as a counter to the rise of cryptocurrencies.

Official Definition of 'Cryptocurrency'

'Cryptocurrency' as defined in legislation

At present, India has no legislation that defines cryptocurrency. A draft Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 has been proposed various times, which defined cryptocurrency as any information, code, number or token which has a digital representation of value and has utility in a business activity, or acts as a store of value or a unit of account. It also defined mining as an activity aimed at creating a cryptocurrency and/or validating a cryptocurrency transaction between a buyer and seller. However, the Bill has not been introduced in Parliament as of November 2025.

Legal Provisions relating to 'Cryptocurrency'

Income-tax Act, 1961

Section 115BBH of the Income-tax Act, 1961, which was added by section 28 of the Finance Act, 2022 provided the official tax structure for cryptocurrencies, or "virtual digital assets". It reads:

Section 115BBH. (1) Where the total income of an assessee includes any income from the transfer of any virtual digital asset, notwithstanding anything contained in any other provision of this Act, the income-tax payable shall be the aggregate of—

(a)  the amount of income-tax calculated on the income from transfer of such virtual digital asset at the rate of thirty per cent; and

(b)  the amount of income-tax with which the assessee would have been chargeable, had the total income of the assessee been reduced by the income referred to in clause (a).

(2) Notwithstanding anything contained in any other provision of this Act,—

(a) no deduction in respect of any expenditure (other than cost of acquisition, if any) or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing the income referred to in clause (a) of sub-section (1); and

(b) no set off of loss from transfer of the virtual digital asset computed under clause (a) of sub-section (1) shall be allowed against income computed under any provision of this Act to the assessee and such loss shall not be allowed to be carried forward to succeeding assessment years.

(3) For the purposes of this section, the word "transfer" as defined in clause (47) of section 2, shall apply to any virtual digital asset, whether capital asset or not.

Income-tax Act, 2025

The recent Income-tax Act, 2025, which shall come into force on 1 April, 2026 also retains the provisions of the Income-tax Act, 1961 on digital virtual assets. The table in Section 194 reads:

"S.I. No.	Assessee	Income	Rate of Tax	Conditions
(A)	(B)	(C)	(D)	(E)
4.	Any person.	Any income from the transfer of any virtual digital asset.	30%	(a) No deduction in respect of any expenditure (other than cost of acquisition, if any) or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing the income referred to in column C; and (b) no set off of loss from transfer of the virtual digital asset computed herein shall be allowed against income computed under any provision of this Act to the assessee and such loss shall not be allowed to be carried forward to succeeding tax years."

Circular for Prohibition on Dealing in Virtual Currencies, RBI, 2018

In 2018, the Reserve Bank of India notified a complete ban on entities regulated by the RBI (such as banks, Non-Banking Financial Corporations, etc.) on dealing with virtual currencies or "cryptocurrencies". It read:

"1. Reserve Bank has repeatedly through its public notices on December 24, 2013, February 01, 2017 and December 05, 2017, cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies.

2. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs.

3. Regulated entities which already provide such services shall exit the relationship within three months from the date of this circular.

4. These instructions are issued in exercise of powers conferred by section 35A read with section 36(1)(a) of Banking Regulation Act, 1949, section 35A read with section 36(1)(a) and section 56 of the Banking Regulation Act, 1949, section 45JA and 45L of the Reserve Bank of India Act, 1934 and Section 10(2) read with Section 18 of Payment and Settlement Systems Act, 2007."

However, in 2020, in the case of Internet and Mobile Association of India v. Reserve Bank of India, the Supreme Court struck down this circular on the grounds of proportionality, and opined that regulation was required, rather than a prohibition.

Companies Act, 2013

In Schedule III of the Companies Act, 2013, General Instructions for Preparation of Statement of Profit & Loss are provided. In 2021, vide G.S.R. 207 (E), this was amended to include the following provisions relating to cryptocurrencies:

Clause 5. Additional Information—A Company shall disclose by way of notes additional information regarding aggregate expenditure and income on the following items:—

(xi) Details of Crypto Currency of Virtual Currency

Where the Company has traded or invested in Crypto currency or Virtual Currency during the financial year, the following shall be disclosed:-

(a) profit or loss on transactions involving Crypto currency or Virtual Currency

(b) amount or currency held as at the reporting date,

(c) deposits or advances from any person for the purpose of trading or investing in Crypto Currency/virtual currency.

CBDT Notification on Tokens as VDA, 2022

Notification no. 75/2022 dated 30.06.2022 specified a token which qualifies to be a virtual digital asset as non-fungible token within the meaning of sub-clause (a) of clause (47A) of section 2 of the Act but shall not include a non-fungible token whose transfer results in transfer of ownership of underlying tangible asset and the transfer of ownership of such underlying tangible asset is legally enforceable.

'Cryptocurrency' as defined in International Instruments

United Nations Convention against Cybercrime, 2024

In 2024, the UN adopted the Resolution 79/243 on "Strengthening International Cooperation for Combating Certain Crimes Committed by Means of Information and Communications Technology Systems and for the Sharing of Evidence in Electronic Form of Serious Crimes", which formally operationalized the UN Convention against Cybercrime. There, cryptocurrencies are defined as "property". The definition of property is as follows:

"Article 2. (i) “Property” shall mean assets of every kind, whether corporeal or incorporeal, movable or immovable, tangible or intangible, including virtual assets, and legal documents or instruments evidencing title to, or interest in, such assets."

Using this classification, countries are authorized to seize, confiscate, or freeze crypto-assets that are "proceeds of a crime".

'Cryptocurrency' as defined in Official Documents

FATF - Report on Virtual Currencies, 2014

In 2014, the Financial Action Task Force (FATF) published a report on "Virtual Currencies: Key Definitions and Potential AML/CFT Risks". It was one of the first international reports to analyze the risk of cryptocurrencies on law enforcement operations across the world. The report also defined Virtual Currencies as follows: Virtual currency is a digital representations of value that can be digitally traded and functions as (1) a medium of exchange; and (2) a unit of account; and (3) a store of value, but does not have legal tender status in any jurisdiction. It is not issued nor guaranteed by any jurisdiction, and fulfills the above functions only by agreement within the community of users of the virtual currency. The Report further distinguishes various types of Virtual Currencies, on the following axes:

1. Convertible vs. Non-Convertible Virtual Currencies: Cryptocurrencies like Bitcoin are generally convertible.
2. Centralized vs. Decentralized Virtual Currencies: Cryptocurrencies like Bitcoin are generally decentralized.

IMF - Global Financial Stability Report, 2021

Taxonomy of Digital Money & Crypto Assets. Credit: IMF.

The International Monetary Fund (IMF's) October 2021 Global Financial Stability Report focussed on cryptocurrencies. In fact, the report was titled "COVID-19, Crypto, and Climate: Navigating Challenging Transitions". Annex 2.1 of this report provided a detailed taxonomy of different types of cryptocurrencies. It argued that cryptos differ according to

1. the issuer: whether it is private or public;
2. the denomination: whether it is in an existing monetary unit or in a new unit of account;
3. convertibility or redemption into a sovereign currency: whether at a fixed face value or at the prevailing market value; and
4. the type of backing: including reserve assets of varying degrees of stability and liquidity regarding which end-users may have a direct legal claim, as well as additional public backstops such as access to emergency liquidity.

I4C - SOP on Investigation Process/Methodologies for Cryptocurrency Related Cyber-Crimes, 2021

In 2021, the Indian Cyber Crime Coordination Centre (I4C) published a detailed Standard Operating Procedure for enforcement and investigative agencies to enforce cyber-crimes in cryptocurrency-related cases. The SOP provide detailed procedures and flowcharts for actions to be taken in case of phone-based wallets, computer-based wallets, contingency plans for if the computer/phone is locked, etc.

RBI - Concept Note on Central Bank Digital Currency, 2022

In 2022, while unveiling the new Central Bank Digital Currency, the Reserve Bank of India published a Concept Note, which contained details on the theoretical and practical framework behind the e-Rupee. It also referred to the proliferation of cryptocurrencies, and argued:

"Private virtual currencies sit at substantial odds to the historical concept of money. They are not commodities or claims on commodities as they have no intrinsic value. The rapid mushrooming of private cryptocurrencies in the last few years has attempted to challenge the fundamental notion of money as we know it. Claiming the benefits of de-centralisation, cryptocurrencies are being hailed as innovation that would usher in decentralized finance and disrupt the traditional financial system. However, the inherent design of cryptocurrencies is more geared to bypass the established and regulated intermediation and control arrangements that play a crucial role of ensuring integrity and stability of monetary and financial eco-system.

As the custodian of monetary policy framework and with the mandate to ensure financial stability in the country, the Reserve Bank of India has been consistent in highlighting various risks related to the cryptocurrencies. These digital assets undermine India’s financial and macroeconomic stability because of their negative consequences for the financial sector. Further, a wider proliferation of cryptocurrencies has the potential to diminish monetary authorities’ potential to determine and regulate monetary policy and the monetary system of the country which could pose serious challenge to the stability of the financial system of the country.

In this context, it is the responsibility of central bank to provide its citizens with a risk free central bank digital money which will provide the users the same experience of dealing in currency in digital form, without any risks associated with private cryptocurrencies. Therefore, CBDCs will provide the public with benefits of virtual currencies while ensuring consumer protection by avoiding the damaging social and economic consequences of private virtual currencies."

IMF - Guidance Note on the Recording of Crypto Assets in Macroeconomic Statistics, 2022

The IMF Committee on Balance of Payments and Statistics also issued a Guidance Note titled F.18 The Recording of Crypto Assets in Macroeconomic Statistics for global consultation. Therein, they discussed various problems in classifying cryptocurrencies while computing National Incomes. However, they defined cryptocurrency as "digital representations of value that rely on cryptography and decentralized peer-to-peer architecture based on distributed ledger technology (DLT), which enables two parties to directly transact with each other without the need for trusted intermediaries."

BIS - Report on the Crypto Ecosystem: Key Elements & Risks, 2023

The Bank of International Settlement (BIS) prepared a report for the G20 Finance Ministers and Central Bank Governor's Meet explaining the elements of cryptocurrency systems. Towards the end of the report, a helpful glossary is given, which defines "crypto-asset" as a type of private sector digital asset that is expressed primarily through cryptography and distributed ledger or similar technology.

'Cryptocurrency' as defined in Official Government Reports

Inter-Ministerial Committee, 2019

A high-level Inter-Ministerial Committee was constituted in November 2017 to study the issues related to virtual currencies and propose actions to be taken.  The Committee submitted its report on February 28, 2019 and the report was released in public domain on July 22, 2019.  The mandate of the Committee included examining the policy and legal framework for regulation of virtual currencies.

The Committee defined Virtual Currency as a digitally tradable form of value, which can be used as a medium of exchange or acts as a store of value or a unit of account. It does not have the status of a legal tender, which is guaranteed by the central government and all parties are legally bound to accept it as a mode of payment. On the other hand, the committee held that cryptocurrency is a specific type of virtual currency, which is decentralized and protected by cryptographic encryption techniques. Decentralization implies that there is no central authority where records of transactions are maintained.  Instead, transaction data is recorded and shared across multiple distributor networks, through independent computers. This technology is known as Distributed Ledger Technology.

'Cryptocurrency' as defined in Case Laws

Internet & Mobile Association of India v. Reserve Bank of India, 2020

In this landmark judgement, the Supreme Court struck down the Reserve Bank of India's 2020 circular. While doing so, the court acknowledged the power of the Reserve Bank of India to regulate the purchase and dealing of cryptocurrency. However, it held that any restriction to the freedom to carry on trade guaranteed Under Article 19(1)(g) of the Constitution of India should pass the test of reasonableness in terms of Article 19(6). When the consistent stand of RBI is that they have not banned virtual currencies and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft bills, both of which advocated exactly opposite positions, it is not possible for the court to hold that the impugned measure by RBI is reasonable. Instead, it supported regulation that would also allow India to uphold global standards.

Hitesh Bhatia v. Mr. Kumar Vivekanand, 2020

In this case, a Judicial Magistrate in the Delhi District Court made some pertinent observations regarding cryptocurrencies and the incumbent responsibility on intermediary platforms involved in trade of virtual currencies. The Court inter alia observed that:

1. transactions in cryptocurrency have to comply with the general law in force in India including Prevention of Money Laundering Act, 2002, Indian Penal Code, 1860, Foreign Exchange Management Act, 1999, tax laws, and with the RBI guidelines on KYC, AML and CFT regulations;
2. KYC is the responsibility of the intermediary, which in turn cannot shy away from the responsibility of ensuring legitimacy of the source and destination of money, and establishment of the real identity of the parties;
3. Even in the absence of any specific law regulating or banning, or monopolizing cryptocurrency, only legitimate trade in the same may aspire for protection under Article 19 (i)(g) of the Constitution of India.

Rhutikumari v. Zanmai Labs Pvt Ltd, 2023

In 2023, the Madras High Court delivered a landmark judgment recognizing cryptocurrencies as property. This allows greater reprieve in the form of asset recovery and injunctions in case of disputes, and imposes manufacturer obligations on maintainers of trading platforms under the Consumer Protection Act, 2019. Further, the judgement allows persons to use digital assets as collateral to secure loans, expanding security and interest in cryptocurrency purchase.

Shailesh Babulal Bhatt v. State of Gujarat, 2025

During oral proceedings, the Supreme Court observed the need for regulating the use of cryptocurrencies. It lamented at the Central Government's inability to produce any regulatory framework, absent the 2018 circular that banned virtual currencies. The Court highlighted the need to proliferate cryptocurrencies considering changing global circumstances, while maintaining necessary checks.

Types of 'Cryptocurrency'

Cyptocurrencies, Virtual Currencies, and Digital Virtual Assets (VDAs) are used interchangeably across various jurisdictions and by international organizations. According to the Washington State Department, Virtual Currency is an electronic medium of value that operates like a currency in some environments, but does not have all the attributes of government currencies. It has either an equivalent value in real currency, or acts as a substitute for real currency. This could even include Central Bank Digital Currencies (CBDCs). On the other hand, cryptocurrency is a type of virtual currency in which transactions are verified and records maintained by a decentralized systems using cryptography, rather than by a centralized authority. Lastly, digital assets are assets that are issued and transferred using distributed ledger or blockchain technology, including but not limited to, so-called “virtual currencies,” “coins,” and “tokens.” Therefore, there is a subtle, but important distinction between these terms.

At the same time, various types of cryptocurrencies exist. Some of these include:

1. Payment Cryptocurrencies: These are digital currencies designed to be used as a medium of exchange, similar to traditional money. They are intended to facilitate transactions and payments. Examples include Bitcoin (BTC), Ethereum (ETH), etc.
2. Stable coins: These are coins designed to maintain a stable value by being pegged to a reserve of assets such as fiat currency or commodities. They aim to reduce volatility and are often used for trading, remittances, and as a stable store of value. Recently, many countries have allowed stablecoins to be traded. Examples include Tether (USDT), USD Coin (USDC), etc.
3. Meme coins: These coins are based on viral internet trends or cultural references, which are traded speculatively depending on their popularity. Generally, they have limited utility and stability compared to traditional cryptocurrencies. Examples include Dogecoin (DOGE), Pepe (PEPE), etc.
4. Privacy coins: These coins are designed to provide enhanced privacy and anonymity for transactions, making it difficult to trace the origin, amount, or destination of transactions. Examples include Monero (XMR), Zcash (ZEC), etc.
5. Utility coins: Utility coins are used within a specific ecosystem to access or pay for certain services or features. They often fuel the operations of a particular platform or application. Examples include Binance Coin (BNB), Chainlink (LINK), etc.

At the same time, it is also important to distinguish these cryptocurrencies from the Central Bank Digital Currency. These are digital banknotes issued by a country’s central bank, such as the Reserve Bank of India's e-Rupee. They are analogous to fiat currency, and present no additional risks or volatility.

International Experience

The following report by the United States Library of Congress provides a comprehensive overview of cryptocurrency's status across various jurisdictions: https://www.loc.gov/item/2014427360/. Further, in 2021, this report was updated, providing a tabular representation on the legal status of crypto in these nations, accessible here: https://tile.loc.gov/storage-services/service/ll/llglrd/2021687419/2021687419.pdf.

Crypto as Legal Tender (Repealed)

El Salvador

El Salvador was the first country in the world to use bitcoin as legal tender, after it was adopted as such by the Legislative Assembly of El Salvador in 2021. The adoption was criticized both internationally and within El Salvador, due to the volatility of Bitcoin, its environmental impact, and lack of transparency regarding the government's fiscal policy. In 2024, El Salvador agreed to partially limit its involvement with Bitcoin as part of a deal made with the International Monetary Fund (IMF). Further, in 2025, Bitcoin was rescinded as legal tender in El Salvador. However, Bitcoin remains legal for private trade, and the government has continued purchasing it, signalling an ongoing interest in cryptocurrency despite the policy change.

Central African Republic

In 2022, the Parliament of the Central African Republic voted in favour of the cryptocurrency law officially making Bitcoin a legal tender in the country. This required all vendors and sellers to accept bitcoin for payment. However, in April 2023, prompted by the IMF's structural bailout, the CAR agreed to repeal the adoption of Bitcoin as legal tender. However, private actors are still permitted to continue transactions in bitcoin.

These experiments show that complete acceptance of decentralized private cryptocurrencies poses unforeseen challenges. Not only did it cause isolation in the international community for both of these nations, but, the volatility and difficulties in implementation made the law ineffective. Therefore, India should not adopt cryptocurrencies as legal tender yet.

Crypto as Virtual Asset/Currency

European Union

The European Union has passed no specific legislation relative to the status of bitcoin as a currency, however, in October 2015, the Court of Justice of the European Union ruled that "The exchange of traditional currencies for units of the 'bitcoin' virtual currency is exempt from VAT" and that "Member States must exempt, inter alia, transactions relating to 'currency, bank notes and coins used as legal tender'", making bitcoin a currency as opposed to being a commodity.

According to the European Central Bank (ECB), traditional financial sector regulation is not applicable to bitcoin because it does not involve traditional financial actors. Others in the EU have stated, however, that existing rules can be extended to include bitcoin and bitcoin companies. The ECB classifies bitcoin as a convertible decentralized virtual currency.

Russia

In July 2020, Russia passed regulation on digital financial asset (DFA) transactions that legalizes cryptocurrency transactions but prohibits their use as payments for goods and services. Russian banks and exchanges can be operators of DFAs if they register with the Bank of Russia, which has the authority to maintain registration of information systems and register operators of DFAs and supervise” the business of information system operators.”

Recently, a pilot project was undertaken to loosen some of these restrictions on payments. Instead, a limited number of Russian 'especially qualified' investors were permitted to buy and sell cryptocurrencies. This status may be granted to individuals whose investments in securities and deposits and last year’s incomes exceed ₽100 million and ₽50 million, respectively. Despite this, the Bank of Russia still does not regard cryptocurrencies as a means of payment and hence proposed to simultaneously impose a ban on settling cryptocurrency transactions between residents outside the experimental legal regime and establish liability for breaching this ban.

India lies somewhere between the Russian and European experience with cryptocurrency. While the Reserve Bank of India tried to ban their trade, this Circular was struck down. As such, the government does not ban their use by private players, but classifies them as VDAs.

Prohibition on Cryptocurrency

Presently, Algeria, Egypt, Morocco (new law de-prohibiting has been proposed), Nepal, Bangladesh, China, Afghanistan, amongst other countries, have completely prohibited the mining, exchange, or any other function with cryptocurrencies.

China

In 2017, the People’s Bank of China (“PBOC”) issued a joint notice with various other authorities on the "Announcement on Preventing Financial Risks from Initial Coin Offerings", which banned initial coin offerings (ICOs) in China. According to the Announcement, ICO financing that raises “so-called ‘virtual currencies’ such as Bitcoin and Ethereum” through the irregular sale and circulation of tokens is essentially public financing without approval, which is illegal. The Announcement warned that tokens or virtual currencies involved in ICO financing are not issued by monetary authorities and therefore not mandatorily-accepted legal tender, and thus do not have equal legal status with fiat currencies and “cannot and should not be circulated and used in the market as currencies. Thus, by nature, it is an unauthorized and illegal public financing activity, which involves financial crimes such as illegal distribution of financial tokens, illegal issuance of securities and illegal fundraising, financial fraud and pyramid scheme.”

There was also a 2021 notice on Further Preventing and Resolving the Risks of Virtual Currency Trading and Speculation. It covers a wider range of activities regarding cryptocurrencies, including investment, transaction, and mining. Among other things, it provides in terms that “virtual currency-related activities [may be] illegal financial activities.” It further emphasizes, “There are legal risks in participating in virtual currency investment and trading activities. If the investment in virtual currencies and related derivatives by a legal person, unincorporated organization, or natural person is against public policy and good customs, the corresponding civil juristic acts shall be null and void, and the losses caused shall be borne by the said legal person, unincorporated organization, or natural person; if the investment is suspected of disrupting financial order and endangering financial security, the party concerned shall be investigated and punished by relevant authorities according to the law.” This provision carries great legal significance as it has been repeatedly cited by Chinese courts in their decisions.

Appearance of 'Cryptocurrency' in Databases

Parliamentary Questions

17th Lok Sabha - Unstarred Question 1938.

Questions:

(a) whether the Government proposes to regulate or restrict the Virtual Digital Assets (VDA) in the country and if so, the details thereof;

(b) the salient features of regulation, if any, laid down by the Government for crypto currency and VDAs;

(c) whether the Government plans to forge international cooperation for regulating crypto currencies and VDAs and if so, the details thereof;

(d) the estimated size of the crypto currency market in the country along with the number of registered/recognised crypto exchanges in the country; and

(e) the details of crypto exchanges which are under investigation by the Government for money laundering and tax evasion cases?

Answers:

(a) to (d): Currently, crpyto assets are unregulated in India. The government does not register crypto exchanges. Crypto assets by definition are borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation for regulation or for banning can be effective only with significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.

(e): The Directorate of Enforcement is investigating several cases related to Crypto frauds wherein a few crypto exchanges have also been found involved in money laundering. Necessary action as per provisions of Prevention of Money Laundering Act, 2002 (PMLA) has been taken by the Directorate of Enforcement. As on 14.12.2022, proceeds of crime amounting to Rs. 907.48 crores have been attached/seized, 03 persons have been arrested and 04 Prosecution Complaints have been filed before the Special Court, PMLA, in these cases.

Further, under Foreign Exchange management Act, 1999 (FEMA), assets amounting to Rs. 289.68 crores have been seized under section 37A of FEMA and 01 Show Cause Notice to crypto exchange Zanmai Labs Pvt Ltd, known as WazirX, and its Director under FEMA for transactions involving crypto assets worth Rs. 2,790.74 crore has also been issued. Few cases of evasion of Goods and Services Tax (GST) by crypto exchanges have been detected by Central GST formations as given below:

No. of Crypto Exchange Investigated	Quantum of evasion detected (in Cr.)	Recovery (in Cr.)	Status
12	87.60	110.97 (including interest & penalty)	Further investigation under process in 8 cases and 4 cases closed on payment of tax along with interest and penalty.

Enforcement Directorate Annual Report, 2024-25

The Enforcement Directorate's Annual Report for FY 2024-25 provided guiding information on cryptocurrency frauds in the country. It provided a table of different types of fraud that it had investigated in over a decade. This shows the rising incidence of crypto crimes in India.

Enforcement Directorate's Year-wise Data for Frauds. Source: ED.

IMF Crypto Assets Monitor, 2025

Starting with the third quarter of 2025, the International Monetary Fund decided to provide a detailed "Crypto Assets Monitor", providing important statistics about penetration and use of cryptocurrencies around the world. According to the Monitor, crypto assets’ market capitalization rose to USD 4.2 trillion over the third quarter of 2025, showing significant growth. Further, traditional financial institutions began purchasing and dealing with stablecoins, showing a market shift.

Market Cap and Market Share of various Crypto-Assets (as of Q3 2025), available at https://www.imfconnect.org/content/dam/imf/News%20and%20Generic%20Content/GMM/Special%20Features/GMM%20Special%20Feature%20-%20Crypto%20Monitor%20October%202025.pdf.

Atlantic Council Live CBDC Tracker

The Atlantic Council has a live, simultaneous and interactive Central Bank Digital Currency (CBDC) tracker, which allows users to gather information about CBDC projects, rollouts, and other such developments from countries around the world. The Tracker shows that 137 countries & currency unions, representing 98% of global GDP, are exploring a CBDC. In May 2020 that number was only 35. Currently, 72 countries are in the advanced phase of exploration-development, pilot, or launch. There is a new high of 49 CBDC pilot projects around the world. 3 countries have fully launched a digital currency-the Bahamas, Jamaica, and Nigeria. All three countries are focused on expanding the reach of their CBDCs domestically. Emerging markets are driving global retail CBDC growth to reduce cash use, enhance financial inclusion, and improve regulatory oversight. This trend is also a response to the growing proliferation of US dollar-backed stablecoins internationally.

Central Bank Digital Currency World Map (as of July 2025), available at https://www.atlanticcouncil.org/cbdctracker/.

Research that engages with 'Cryptocurrency'

Reinventing Regulation: The Curious Case of Taxation of Cryptocurrencies in India, 2017

In this paper published in the NUJS Law Review, the author recommends that the government adopt an approach similar to Australia or Japan for taxing cryptocurrencies, specifically treating them as "money" for Goods and Services Tax (GST) purposes to avoid double taxation and encourage trading. It is also proposed that KYC norms and anti-money laundering standards currently applicable to financial institutions and banks should be extended to bitcoin exchanges and wallet operators, and there should be an establishment of institutions based on mutual consensus and improved co-operation of several taxing jurisdictions in information sharing to combat evasion. A conscious effort to develop regulations specifically dealing with the tax treatment of bitcoins is considered vital.

The Case for Regulating Crypto-Assets, 2019

In his article 'The Case for Regulating Crypto-Assets', the author, Jaideep Reddy, strongly argues against the outright ban on crypto-assets recommended by India's Inter-Ministerial Committee (IMC). He recommends that an empirical and regulatory approach be adopted to mitigate the risks associated with crypto-assets rather than an outright prohibition. Since crypto-assets are seen as a value-neutral platform technology akin to the Internet , he concludes that a ban is unlikely to be a reasonable restriction on fundamental rights like the right to trade and do business (Article 19(1)(g)), the right to life and liberty (Article 21), and the right to property (Article 300A). The paper proposes that legitimate concerns cited by the IMC (such as financial stability, money laundering, and cybersecurity) can be effectively addressed with less invasive measures, such as regulating cross-border transactions under the Foreign Exchange Management Act (FEMA) , imposing proportionate consumer protection norms , and introducing regulation to protect consumers from issues like price manipulation and potential 'forking'. The author advocates for licensing and supervising crypto-asset intermediaries like exchanges to perform crucial functions like holding consumer assets and settling transactions. In the event of a negative impact on energy consumption, the issue should be addressed by proportionate regulation after a scientific study, rather than a prohibition. Overall, the paper underscores the need for an even-handed regulatory framework that minimizes risks while allowing for innovation, reflecting the approach taken by most developed and G20 nations.

Policy Research Working Paper 9962, 2022 (World Bank)

In 2022, the World Bank Group published a Policy Research Working Paper titled 'Crypto-Assets Activity around the World: Evolution and Macro-Financial Drivers'. The paper analyzed trends in cryptocurrency transactions and volume across the world, and their impact on the economic outlook of countries. It found that crypto volumes had grown rapidly around the world reaching US$2.8 trillion in the first six months of 2021, driven by North America and Emerging Market and Developing Economies (EMDEs) in Europe and Asia. However, even in high-volume regions, total volume remained modest relative to GDP and retail volume is an order of magnitude smaller (i.e., transactions less than $10k), suggesting limited uptake by retail users: smaller transactions represented about 7 percent of the total volume. Bitcoin, ether, and a small set of stablecoins represented the large majority of crypto volume, with a relatively minor, but growing role for Decentralized Finance (DeFi).

White Paper on Pathways to the Regulation of Crypto-Assets, 2023 (WEF)

The World Economic Forum (WEF) published a White Paper on "Pathways to the Regulation of Crypto-Assets: A Global Approach" in April 2023. The paper made the following recommendations:

1. for International Organizations:
   1. Promote a harmonized understanding of taxonomy/classification of crypto-assets and activities.
   2. Set out best practices and baseline regulatory standards for achieving the desired regulatory outcomes.
   3. Encourage passportability of entities and data sharing.
2. for National Regulators:
   1. Pursue cross-sector coordination between regulators, law-enforcement agencies, central banks, etc.
   2. Develop guidelines, best practices and frameworks to proportionately regulate the on/off ramps for crypto-asset ecosystems.
   3. Adopt best practices to leverage technologies and analytics service providers for automated regulatory compliance/reporting, real-time risk alerts and tracking regulatory change.
3. for Industry:
   1. Make efforts to coordinate and collaborate on evolving interoperable technical standards.
   2. Make efforts to establish best practices for addressing operational risk, market risk, counterparty risk, cybersecurity risks and AML protections as well as any other requirements consistent with national laws and regulations.
   3. Engage with policy-makers and sectoral regulators to innovate responsibly with a view to protecting and empowering users; align on educational efforts.

Can Crypto-Assets Play a Role in Foreign Reserve Portfolios?, 2024 (World Bank)

The World Bank released a 53-page report on the role of cryptocurrencies in Foreign Reserves maintained by central banks. The Bank argued that Foreign Reserves should not rely on such crypto-assets due to the volatility and decentralization associated with them. In this report, the authors also tried to define crypto-assets.

"While terminology differs across regulatory authorities and standard-setting bodies, crypto-assets can be broadly defined as private digital representations of value that can be used for payment or investment purposes or to access a good or service and that rely on distributed ledger or similar technology. The definition of crypto-assets typically excludes e-money, central bank digital currencies (CBDCs), and digital representations of traditional financial instruments."

Challenges & Issues

Financial Integrity

The misuse of virtual assets for illicit finance remains a central concern for international security organizations. According to TRM, although total crypto transaction volume grew substantially in 2024 (exceeding $10.6 trillion), illicit volume remains persistently high. They suggest that illicit addresses received approximately $41 billion to $45 billion in 2024, representing between 0.14% and 0.4% of overall crypto volume. The primary categories of criminal exploitation remain consistent:

1. Sanctions compliance evasion.
2. Transactions involving Blocklisted entities.
3. Scams and Fraud.
4. Illicit drug sales.

The FATF has provided clear red flag indicators for detecting criminal activity, which often center on technological features that enhance anonymity (e.g., mixing or tumbling services, peer-to-peer exchanges), geographical risks (exploiting weak or absent national regulations), and irregular transaction patterns (uncommon size or frequency lacking a logical business explanation).

Volatility

Consumers face problems of extreme price volatility, fraud, and cyber-attacks. The decentralized nature of cryptocurrencies means they are subject to extreme price swings. For instance, during the "crypto winter" of 2022, the market capitalization of the largest 100 cryptocurrencies dropped by 70% in a single year, resulting in steep losses for investors. Furthermore, the lack of central oversight makes investors vulnerable to sophisticated fraud schemes and ongoing cyber vulnerabilities. The absence of comprehensive and uniform market regulation globally exacerbates these issues, leaving crucial gaps exploited by criminals.

Environmental, Social, and Governance (ESG)

Cryptocurrency mining causes extremely high energy consumption. Bitcoin mining alone utilized over 150 Terawatt-hours (TWh) of electricity in 2022, consuming more power than large nations like Argentina. Further, most miners typically gravitate toward the cheapest electricity sources to maximize their profit, which are often derived from fossil fuels, compounding the environmental cost. This presents clear violations of various environmental statutes, and prevents the accomplishment of the Paris Agreement's 2030 goal.

Way Forward

1. Cross-border Oversight: The Bank of International Settlements (BIS) suggested that international organizations can promote rigorous regulatory alignment, particularly concerning global stablecoin arrangements. Countries can assess cross-border crypto activities, utilizing existing cooperation tools and developing bilateral or multilateral arrangements to ensure effective oversight, thereby addressing the challenges identified in fragmented implementations.
2. Taxation & Data Exchange: Nations can also use the OECD Crypto-Asset Reporting Framework (CARF) (which has not been signed by India yet), coupled with mandatory registration and the automatic exchange of data on non-resident users. This directly targets tax evasion and avoidance schemes that leverage digital borders.
3. Balanced regulation: As the Supreme Court has repeatedly pointed out, including in the case of Shailesh Babulal Bhatt v. State of Gujarat, 2025, Parliament has to establish regulation for cryptocurrency, that ensures stability while supporting innovation. This requires consultation with various stakeholders.
4. Promotion of Stablecoins & CBDCs: Countries across the world are also promoting their own Central Bank Digital Currencies (CBDCs). Even the Reserve Bank of India has been aggressively promoting its e-Rupee initiative. This should be promoted, for allowing the advantages of cryptocurrencies to be retained with stability of fiat currencies. Moreover, stablecoins can also be accepted and introduced, like the United States GENIUS Act, which would be pegged to the Indian rupee.

Related Terms

Central Bank, Reserve Bank of India, Non-Fungible Token (NFT), Anti-Money Laundering (AML), Know Your Customer (KYC), Blockchain.