India's 39 million crypto holders operate in a jurisdiction with no dedicated crypto legislation, a 30% flat tax on gains, a 1% TDS on every transaction, and a central bank that formally advocates prohibition. On July 15, 2026, the Parliamentary Standing Committee on Finance heard its final witne...
"We have always maintained that cryptocurrency poses serious financial stability, monetary policy, and capital account management risks." — Reserve Bank of India, submission to the Standing Committee on Finance, July 2, 2026
India's 39 million crypto holders operate in a jurisdiction with no dedicated crypto legislation, a 30% flat tax on gains, a 1% TDS on every transaction, and a central bank that formally advocates prohibition. On July 15, 2026, the Parliamentary Standing Committee on Finance heard its final witness — the Department of Economic Affairs — before locking recommendations for a report titled "A Study on Virtual Digital Assets (VDAs) and Way Forward," expected to be tabled during the Monsoon Session.
The report arrives at a moment of maximum policy tension. The Reserve Bank of India wants to ring-fence the banking system from crypto entirely. The Enforcement Directorate just raided six Bengaluru firms over ₹2,500 crore ($290M) in alleged FEMA violations. Tax authorities have identified ₹888.82 crore in undisclosed crypto income and served notices to 44,000 taxpayers. Meanwhile, an estimated 73% of Indian trading volume has migrated offshore, and an OECD report pegged India's annual crypto activity at $340 billion — 9% of GDP.
The outcome of this parliamentary process will determine the regulatory trajectory for what is, by user count, one of the world's largest crypto markets.
The Standing Committee on Finance, chaired by BJP MP Bhartruhari Mahtab, has conducted seven sittings on virtual digital assets since late 2025. Witnesses have included domestic exchanges (CoinDCX, CoinSwitch, ZebPay, WazirX), global platforms (Binance, Coinbase), and government bodies including the Financial Intelligence Unit (FIU-IND), the Central Board of Direct Taxes (CBDT), the Revenue Department, and the Ministry of Corporate Affairs.
The July 2, 2026 sitting was notable for the RBI's first direct appearance before the committee on this subject. The central bank presented a position paper advocating what internal documents describe as a policy "leaning toward prohibition," according to Reuters reporting on government documents.
The July 15 sitting with the Department of Economic Affairs is expected to be the final evidence session. The committee's report, once tabled in the Monsoon Session, will carry advisory weight but no binding legislative authority. Any formal regulatory framework would require separate legislation.
The timeline matters: India's 2021 draft bill to ban private cryptocurrencies was never introduced. Policy discussions have been delayed repeatedly. The current parliamentary process represents the most sustained institutional engagement with crypto policy India has undertaken.
India's crypto tax framework, introduced in Budget 2022, remains among the most punitive globally. The structure:
Budget 2026-27, presented in February 2026, maintained this framework without modification.
The aggregate effect on domestic trading has been measurable. According to data presented to Parliament in May 2026, approximately 72.7% of India's crypto trading volume now occurs on offshore platforms. Independent estimates cited by CryptoTimes place that figure closer to 90% for certain trading categories. MP Raghav Chadha told Parliament during Budget debates that over 180 Indian crypto startups have relocated abroad.
Derivatives dominate what remains of the domestic market. Crypto futures now account for 80% of total onshore volume, according to CryptoTimes reporting from July 15, 2026. The shift reflects rational arbitrage: futures transactions incur lower effective TDS liability than spot trades.
Indian traders generated approximately Rs 51,252 crore in crypto volume during FY25. Parliament members have flagged that the current tax structure diverts an estimated $6.1 billion annually to offshore venues, reducing both domestic liquidity and tax revenue capture.
The Reserve Bank of India's position, as presented to the Standing Committee, rests on four stated concerns:
The RBI's proposed remedy is containment rather than regulation: barring banks and regulated financial entities from dealing in crypto and privately issued stablecoins, and blocking the use of such assets in payments and settlements.
This position puts the RBI at odds with the multi-regulator framework that SEBI has separately proposed. Under SEBI's model, the securities regulator would oversee tokens exhibiting characteristics of securities — those offering voting rights, dividends, or returns tied to third-party efforts — while the RBI would retain authority over foreign exchange and cross-border flows. SEBI has recommended it serve as primary supervisor of crypto exchanges.
No formal legislation or notification has resolved this jurisdictional question. As of July 2026, both regulators have articulated positions, but neither has been granted explicit statutory authority over the asset class.
While the regulatory framework remains unsettled, enforcement has accelerated.
FIU-IND Registration: 54 Virtual Digital Asset Service Providers (VDASPs) are registered with FIU-IND as of March 2026. The agency has shut down 53 non-compliant crypto websites and apps. Registration is activity-based and applies to offshore platforms serving Indian users.
FEMA Investigations: On June 17, 2026, the Enforcement Directorate searched six Bengaluru-based firms — including Transak Technology India, Carretx Technologies, and Mokshagna Technologies — alleging ₹2,500 crore ($290M) in unauthorized cross-border crypto remittances conducted without RBI authorization. The ED restrained bank accounts holding approximately ₹6 crore. The companies allegedly provided crypto on-ramp and off-ramp services that functioned as de facto foreign exchange channels.
Two days earlier, on June 15, the ED arrested an individual connected to an alleged ₹500 crore cryptocurrency Ponzi scheme involving the Korvio Coin (KRO) token.
Tax Enforcement: The CBDT disclosed during the committee's January 7, 2026 sitting that it had identified ₹888.82 crore in undisclosed VDA-linked income and issued notices to more than 44,000 taxpayers. From April 1, 2026, stricter reporting standards took effect, with entities facing daily fines for inaccurate transaction reporting.
India's current crypto status exists in a legal grey zone created by overlapping actions and inactions:
The result: crypto is legal to hold and trade, subject to heavy taxation, but operates without investor protection rules, market conduct standards, or a clear licensing framework. Exchanges operate under FIU-IND's AML registration, which covers anti-money laundering compliance but not trading rules, custody standards, or disclosure requirements.
This vacuum has practical consequences. WazirX, India's largest exchange by pre-2024 volume, suffered a $230 million hack in 2024. Without a dedicated regulatory framework, affected users had no statutory recourse beyond general civil and criminal law.
Despite — or because of — the regulatory ambiguity, India's crypto market is substantial:
The $340 billion OECD figure requires context: it measures crypto received by Indian-geolocated blockchain addresses, including trading, payments, wallet transfers, and DeFi activity. It does not represent net capital flows and does not prove rupees left India or foreign currency entered. It is a gross activity measure, not a balance-of-payments data point.
CoinSwitch reports over 25 million registered users; CoinDCX claims over 15 million users and Rs 1 lakh crore in quarterly trading volume.
India has committed to implementing the OECD's Crypto-Asset Reporting Framework (CARF) by April 1, 2027. CARF requires crypto-asset service providers — exchanges, brokers, wallet operators, and NFT marketplaces — to report to tax authorities:
The framework enables multilateral data sharing between signatory countries. For India, CARF addresses a core enforcement gap: the inability to track offshore trading activity by Indian residents on non-registered platforms.
Implementation will require VDASPs to build reporting infrastructure compliant with CARF technical standards. The Budget 2026-27 included provisions for the reporting framework but deferred detailed implementation rules.
India's Standing Committee on Finance heard its final witness on July 15, 2026. The VDA report, expected during the Monsoon Session, will be the first formal parliamentary position on crypto regulation since the asset class reached mainstream adoption in India.
The RBI advocates prohibition-leaning containment. The central bank wants banks and regulated entities barred from crypto exposure entirely, including stablecoins. This would effectively cut off fiat on-ramps for domestic exchanges.
73-90% of Indian crypto volume has moved offshore. The 30% tax, 1% TDS, and 18% GST on trading fees have made onshore trading uncompetitive. Parliament members estimate $6.1 billion annually flows to offshore venues.
Enforcement is intensifying without a regulatory framework. The ED's ₹2,500 crore FEMA probe and CBDT's 44,000 tax notices represent aggressive action within existing legal authorities. A comprehensive crypto law would expand the enforcement toolkit.
CARF implementation in April 2027 will close the offshore data gap. Cross-border transaction reporting will give Indian authorities visibility into offshore activity by Indian residents for the first time.
No resolution between SEBI and RBI jurisdictional claims. The two regulators have articulated incompatible visions — SEBI favors oversight and market conduct rules; the RBI favors exclusion from the regulated financial system.
India's crypto policy will likely be shaped more by institutional inertia than by any single parliamentary report. The Standing Committee's recommendations carry advisory weight, not legislative force. Actual legislation requires government introduction, a process that has stalled repeatedly since 2021.
The more immediate determinant is the RBI's operational authority. Without new legislation, the central bank retains significant de facto power to restrict banking system access through existing FEMA and banking regulation channels — as demonstrated by its 2018 circular, which was struck down by the Supreme Court on procedural grounds but illustrated the RBI's institutional preference.
What the data shows: India has a large, active crypto market ($340 billion in annual activity, 39 million holders) that is rapidly migrating offshore due to a tax regime that makes domestic trading uncompetitive. The government captures less revenue than it would under a lower-rate, higher-compliance model, according to multiple parliamentary submissions. The RBI's prohibition preference and the market's offshore migration are reinforcing dynamics — each makes the other more likely.
CARF implementation in 2027 may alter the cost-benefit calculation by giving authorities offshore visibility they currently lack. Until then, India's crypto market will continue operating in a regulatory interregnum where the tax is set, the enforcement is real, but the rules of the game remain unwritten.