Is crypto legal in India? Regulation & rules (2026)

A Department of Economic Affairs–led working group (with RBI, SEBI and the Finance Ministry) prepared a public discussion paper to classify crypto assets and frame regulation, drawing on the IMF-FSB roadmap; release slipped and the paper remained unpublished. It signals India's intent to move from ad-hoc taxation/AML measures toward a comprehensive framework.

After being blocked, Binance registered as a reporting entity with India's Financial Intelligence Unit and paid a ~₹18.82 crore/₹188 crore-class penalty (about US$2.25 million) for PMLA non-compliance — India's largest crypto penalty — and resumed Indian operations. It established that offshore exchanges must comply with Indian AML law to serve Indian users.

FIU-IND issued compliance show-cause notices to nine offshore VDA service providers — including Binance, KuCoin, Kraken, Huobi and Bitfinex — for operating without PMLA registration, and asked MeitY to block their URLs. It marked India's first hard enforcement against unregistered foreign crypto platforms.

At the request of India's G20 presidency, the IMF and FSB published a joint synthesis paper and roadmap for regulating crypto assets, which G20 finance ministers adopted. It anchored India's stance that crypto needs coordinated global rules rather than a unilateral ban.

A Ministry of Finance gazette notification classified VDA service providers (exchange, transfer, custody, and financial services around VDAs) as 'reporting entities' under PMLA, 2002, mandating FIU registration, KYC and suspicious-transaction reporting. This put crypto businesses under India's formal AML supervision for the first time.

The RBI began its first retail central bank digital currency pilot in select cities with eight banks, issuing a token that is legal tender. It established a sovereign digital-currency alternative the state favours over private crypto.

The Finance Act 2022 inserted Section 115BBH (flat 30% tax on VDA gains, no loss set-off) and Section 194S (1% TDS on transfers, effective 1 July 2022), plus a statutory VDA definition. By taxing rather than banning crypto, it gave digital assets de facto legal recognition while imposing one of the world's harshest tax regimes.

The government listed a bill to bar most private cryptocurrencies while enabling an RBI digital currency for Parliament's winter session, but it was never introduced or passed. The episode reflected the government's unresolved swing between banning and regulating crypto.

A three-judge bench struck down the RBI's 2018 ban on banks servicing crypto businesses as disproportionate under Article 19(1)(g). The ruling revived crypto trading in India and is the foundational judgment establishing crypto's lawful status absent legislation.

The RBI directed all banks and regulated entities to stop providing services to anyone dealing in virtual currencies and to exit existing relationships, effectively cutting crypto off from the banking system. This circular triggered the litigation that reached the Supreme Court.

The RBI warned holders and traders of Bitcoin and other virtual currencies of financial, legal, operational and security risks, noting it had licensed no entity to deal in them. It was India's first official regulatory statement on crypto and set a cautious tone for years to come.