Key takeaways
- Strengthened ties between India’s Prime Minister Narendra Modi and US President Donald Trump have raised hopes among crypto investors of India for revisiting strict digital asset tax policies
- India’s 30% flat tax on crypto profits, alongside a 1% Tax Deducted at Source (TDS) on every trade, has been widely criticized by industry leaders
- Due to heavy taxation and regulatory uncertainty, nearly 90% of India’s crypto trading volume has shifted offshore
- After exiting in 2022 amid regulatory uncertainty, leading global exchanges Coinbase and Binance have re-entered the Indian market, signaling a commitment to comply with local regulations.
- Valued at $2.5 billion in 2024 and expected to reach $15 billion by 2035, India’s rapidly expanding crypto market requires a forward-looking regulatory framework to boost industry confidence
With diplomatic ties between Indian Prime Minister Narendra Modi and US President Donald Trump being strengthened, optimism has stirred across India’s crypto currency ecosystem. Trump’s return to the White House, accompanied by his increasingly pro-crypto stance globally, is believed by Indian industry leaders to have created an environment for a long-overdue reassessment of India’s stringent digital asset tax regime.
Crypto Market Suffocated by Taxation and Compliance Rules
Since the introduction of the digital asset tax framework in 2022, the Indian crypto market has been subjected to increasing financial and regulatory pressures. The 2025 Union Budget reaffirmed a flat 30% tax on all profits from cryptocurrency transactions, alongside a 1% Tax Deducted at Source (TDS) on every trade. Additionally, new compliance requirements have been imposed, mandating that designated entities report crypto activity to the Financial Intelligence Unit (FIU-IND).
These measures have been widely criticized by industry participants for choking innovation and driving investors and traders to offshore platforms. According to Ashish Singhal, co-founder of India-based crypto currency trading platform CoinSwitch, the tax regime is “very harsh,” with many users being “pushed toward unregulated markets and away from legitimate platforms.” The ongoing high TDS rate is blamed for creating liquidity challenges and discouraging retail participation.
Since the enforcement of the current tax regime, it has been reported by the Esya Centre that nearly 90% of India’s crypto trading volume has shifted offshore. Excessive taxation and regulatory ambiguity have led Indian investors to flock to foreign exchanges, resulting in a significant drain on domestic platforms.
Things May Improve in the Future
However, a welcome change has occurred recently. Two of the world’s leading crypto exchanges, including Coinbase and Binance, have made a strategic return to the Indian market. They had previously withdrawn their operations in 2022, primarily due to the prevailing regulatory uncertainties that created an unpredictable and challenging business environment.
Both Coinbase and Binance have recently registered with the FIU-IND. This move marks a clear and important shift in their approach — from an initial stance of caution and withdrawal driven by concerns over possible prohibitive regulations, to a renewed commitment centred around adherence to regulatory compliance and collaboration with Indian authorities.
Indeed, India’s cryptocurrency market, currently valued at approximately $2.5 billion in 2024, is poised for significant growth, with projections estimating its value could reach $15 billion by 2035. Such rapid expansion underscores the urgent need for a comprehensive and forward-thinking shift in regulatory policies. This paradigm shift is essential to foster greater confidence within the industry, encouraging innovation while providing clear guidelines to both domestic and international stakeholders.
