Key Takeaways:
- Crypto firms are lobbying to reduce steep taxes that have driven Indian traders to foreign platforms.
- The government now meets crypto leaders frequently, indicating a softening stance toward digital asset regulation.
- India’s crypto market could grow from $2.5 billion to $15 billion by 2035.
India’s cryptocurrency market is making a strategic pivot as market leaders make a case before policymakers to liberalize regulations. More than 90% of cryptocurrency trading by Indian citizens has moved offshore following the introduction of a 30% capital gains tax and a 1% transactional fee in 2022.
As a response, homegrown cryptocurrency exchanges are now proactively engaging policymakers to revisit these strict regulations. Recent developments within the United States, in the form of Donald Trump’s comeback to the presidency, coupled with his positive attitude towards digital currencies, also seem to have impacted New Delhi’s policy.
Monthly, and at times weekly, meetings between crypto executives and Indian officials reflect a newfound willingness to engage. The industry’s current appeal centers on reducing the transaction tax to a more manageable 0.1%, which proponents argue would maintain traceability without suppressing growth.
Indian Regulators’ Longstanding Crypto Skepticism
For years, Indian authorities treated digital payments with suspicion, citing tax evasion and money laundering concerns. The Reserve Bank of India, which was a vocal critic earlier, then issued banking restrictions in 2018 that the Supreme Court lifted in 2020.
While the RBI still sounds cautious, recent comments from top officials have been less confrontational. At the same time, India’s Finance Ministry has been demonstrating flexibility.
The government proposed, after Trump’s inauguration, to update a central industry discussion paper on policy around crypto.
The recent February Union Budget brought no instant tax relief, but the increased frequency of interaction between policymakers and industry representatives suggests a freer regulatory environment in the making.
Market Optimism Grows Amid Global and Domestic Momentum
The changing policy has attracted the interest of notable exchanges worldwide, including Binance and Coinbase, which have returned to the Indian market.
According to Grant Thornton, India’s cryptocurrency market, which is now at $2.5 billion, has the potential to reach over $15 billion at the end of 2035.
Yet, the sector is still plagued by public misconceptions and regulatory vagueness. Most Indians still presume that digital assets are illegal, even when there has been increased interest from tech-conscious youth and family offices.
As policy reform makes slow progress, stakeholders are placing a bet that continued engagement will ultimately lead to a regulatory architecture that allows compliance and innovation.
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