Cryptocurrency in India: Laws, Taxes, and AML Rules (2026)

India leads global crypto adoption with 119 million users in 2025, projected to reach 123 million by the end of 2026. It ranked first in the 2025 Chainalysis Global Crypto Adoption Index, followed closely by the United States, Pakistan, Vietnam, and Brazil.

Crypto laws in India remain limited; however, there have been recent moves to clarify and tighten the rules. This includes updated anti-money laundering (AML) guidelines for service providers dealing with virtual assets from the country’s financial intelligence unit (FIU-IND).

Virtual assets carry elevated money laundering risk, largely because many blockchain transactions are pseudonymous. These risks have been recognized by international standard setters, including the Financial Action Task Force (FATF), which has issued guidance on mitigating the risks of money laundering and terrorist financing associated with virtual assets.

For regulated entities involved in cryptocurrency in India, understanding these obligations and the potential for future industry regulation is business-critical. Failing to comply with AML rules can lead to serious consequences, including fines, suspension or loss of operating licenses, and substantial reputational harm.

Is crypto legal in India?

As of 2026, the status of cryptocurrency in India remains complex.

While the Reserve Bank of India (RBI) imposed a banking ban on cryptocurrency transactions in 2018, the Supreme Court of India lifted it in March 2020, allowing banks to provide services to cryptocurrency exchanges. Like in most countries, cryptocurrencies, including Bitcoin and Ethereum, are not considered legal tender in India.

India’s FIU-IND guidelines for AML and countering the financing of terrorism (CFT) require virtual digital asset service providers (VDA SPs) to be registered. VDA SPs are India’s implementation of the FATF VASP standard.

The guidelines also set standards for governance, client acceptance, client risk classification, and client due diligence (often referred to as “customer due diligence,” or CDD, in other countries).

India Cryptocurrency Bill explained

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was proposed to establish a regulatory framework for digital assets in India. It also proposed granting the Reserve Bank of India (RBI) authority to issue an official central bank digital currency (CBDC). Early descriptions of the bill suggested it could prohibit certain "private cryptocurrencies," although the full text was never made public.

The bill was listed for introduction in Parliament in 2021 but was never introduced and has effectively been shelved. India has instead focused on tax and AML measures to govern VDAs.

As of August 2026, the bill remains unavailable to the public and its future is uncertain. Successive governments have indicated they would continue to evaluate the appropriate regulatory approach for cryptocurrencies, but no comprehensive crypto bill has yet been enacted.

Crypto regulations in India: Key rules

The Indian government has cited concerns about consumer protection, financial stability, and the potential misuse of cryptocurrencies for illicit activities. 

Here’s a breakdown of all cryptocurrency rules in India:

Crypto tax in India: 30% tax and 1% TDS

Tax rules for crypto in India are set by the Income Tax Department and include:

• 30% tax on gains. Income from the transfer of VDAs, including cryptocurrencies, is taxed at a flat rate of 30%, plus any applicable surcharge and a 4% health and education cess.
• 1% TDS (Tax Deducted at Source). A 1% TDS applies to the consideration paid for the transfer of virtual digital assets. It generally applies to transactions exceeding ₹10,000 annually, or ₹50,000 for specified persons.
• Limited deductions. Taxpayers cannot claim deductions for expenses incurred in trading virtual digital assets, other than the cost of acquisition. Losses from VDA transfers also cannot be set off against other income or carried forward.

This information is provided for general informational purposes only and should not be considered tax or legal advice. Before making any tax-related decisions, consult a qualified tax advisor or other professional familiar with your individual circumstances.

The status of stablecoins in India

India has no dedicated stablecoin law. Policy discussions on possible stablecoin regulation continue, but as of 2026 no specific framework has been enacted, and stablecoins remain treated as VDAs. Stablecoins sit inside the Virtual Digital Asset perimeter, so they carry the same 30 percent tax, 1 percent TDS, and PMLA and FIU-IND obligations as any other VDA, and they count as neither legal tender nor an RBI-authorized payment instrument. Any sovereign-backed or "twin-rupee" stablecoin concepts have no official regulatory status at this time. The RBI takes the hardest line of any regulator here. It treats foreign-currency stablecoins as a threat to monetary sovereignty, wants banks kept clear of all crypto exposure, and points to the Digital Rupee as the sovereign alternative. A rupee-backed token has been floated, given fresh urgency after a mid-2026 squeeze in dollar-stablecoin supply, but nothing of the sort has status yet.

That gap is what makes India an outlier. Singapore, the United States, and the EU have written rules that allow stablecoins to operate as regulated payment tokens, and products have followed. In India, no framework recognizes a stablecoin as a means of payment. The RBI is actively pushing banks and card rails away from the asset class rather than toward it. And the tax code makes the use case unworkable on its own, because every spend of a stablecoin counts as a transfer of a VDA that triggers the 1 percent TDS and a taxable event. India's answer to the "spend digital money at the till" problem is the programmable Digital Rupee over UPI rails, which the RBI casts as the substitute for private stablecoins, not a bridge to them. 

Suggested read: Trust by Law vs. by Market: Stablecoin Lessons from Singapore and Hong Kong

Crypto Travel Rule in India

The Notification issued by the Indian Ministry of Finance on March 7, 2023, brought VDAs, including cryptocurrency, under the purview of the Prevention of Money Laundering Act (PMLA). This encompasses activities such as VDA trading, transfer, storage, management, and related financial services. With this, India has begun implementing the Travel Rule, a global standard set by the FATF, as part of its broader effort to enhance AML/CFT measures. 

Following the above Notification, the Financial Intelligence Unit India (FIU-IND) issued AML & CFT Guidelines in 2023 for reporting entities providing VDA services. These guidelines, now superseded by the updated version issued in January 2026, established a mandate for Service Providers providing services relating to VDA service providers (SPs). Under Section 12(1)(a) of the PMLA, SPs must include accurate originator and beneficiary information in wire transfers. SPs are also required to monitor transfers for missing information and conduct screening. 

As per the guidelines on the Travel Rule in India, the originating SPs must obtain and hold required and accurate originator information and required beneficiary information on VDA transfers, submit the above information to the beneficiary SP or financial institution (if any) immediately and securely, and make it available on request to appropriate authorities. Beneficiary SPs must obtain and hold required originator information and accurate beneficiary information on VDA transfers and make it available on request to appropriate authorities. This applies regardless of whether the value of the VDA transfer is denominated in fiat currency or another VDA.

India Travel Rule compliance requirements

The required information that the beneficiary SP must obtain from the originator SP and hold includes:

1. Originator’s Permanent Account Number (PAN) or National Identity Number 
2. Originator’s name (i.e., the sending person’s name). The beneficiary institution does not need to verify the originator’s name for accuracy, but should review it to monitor suspicious transactions and conduct sanctions screening.
3. Originator’s account number used to process the transaction. In the VDA context, this could mean the “wallet address” of the originator.
4. Originator’s physical (geographical) address that uniquely identifies the originator to the ordering institution, or date and place of birth.
5. Beneficiary’s name (i.e., the name of the person who is identified by the originator as the receiver of the VDA transfer). The beneficiary institution must verify the beneficiary’s name for accuracy if their customer's name has not been verified previously. Thus, the beneficiary institution can confirm whether the beneficiary’s name and account number obtained from the ordering institution match its verified customer data. 
6. Beneficiary’s account number used to process the transaction. In the VDA context, this could refer to the beneficiary's “wallet address.”
7. There’s no de minimis threshold, which means that in India the full scope of required information must be provided for every VDA transfer involving reporting entities, regardless of the amount (transactions between unhosted wallets are out of scope).

Learn the details of the Travel Rule in India in Sumsub’s documentation.

AML and KYC rules for crypto exchanges in India

• Anti-Money Laundering regulations. The primary legislation that outlines the framework for combating money laundering in India is the Prevention of Money Laundering Act, 2002. Crypto exchanges in India, as well as other service providers, must comply with AML regulations, including stringent know your customer (KYC) norms to verify user identities. On March 7, 2023, the government published a gazette notice mandating intermediaries dealing with VDAs and crypto exchanges to undertake KYC checks on their customers and platform users.
• Reporting obligations. Exchanges are required to report suspicious transactions and maintain transaction records. Under section 12 of the PMLA, every Reporting Entity is mandated to maintain a record of all transactions and documents evidencing the identity of clients, and to furnish the same to the central government, including information and reports of suspicious transactions to the Financial Intelligence Unit, Government of India (FIU-IND). In addition, under Rule 5(2) of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, every Reporting Entity must develop an internal mechanism for maintaining such information.

Suggested read: How to Comply with KYC/AML Rules in India, a Global Fintech Hub

Is crypto mining legal in India?

Currently, crypto mining in India is a legal gray area. Although there is no explicit nationwide ban on cryptocurrency mining, local regulations in some states may restrict or discourage it, particularly because of the high energy consumption associated with mining operations.

FIU-IND registration for crypto exchanges in India

VDA SPs are required to register with FIU-IND. The 2026 guidelines set out exactly who should register and that failure to do so can result in penalties under the Prevention of Money Laundering Act, 2002.

Who must register with the FIU in India?

VDA SPs must register with FIU-IND if they are “engaged in any activity or operation as notified by the Central Government vide Notification S.O. 1072(E) dated March 07, 2023” (as per the 2026 guidelines).

As set out in a communication from FIU-IND to key industry figures, these activities are:

1. Exchanging VDAs for fiat currencies and vice versa
2. Exchanging one or more forms of VDAs for others
3. Transferring VDAs
4. Safekeeping or administration of VDAs or instruments enabling control over VDAs
5. Participating in and providing financial services related to an issuer’s offers and sales of VDAs

FIU-registered crypto exchanges in India

At the start of 2026, almost 50 VDA SPs were registered with FIU-IND, according to India’s Economic Times. These include SunCrypto, CoinDCX, WazirX, ZebPay, and the country’s first crypto exchange, Unocoin.

Reporting duties: Suspicious Transaction Reports and record-keeping

The 2026 FIU-IND guidelines mandate that reporting entities under PMLA must:

• Have robust systems to generate alerts when suspicious transactions are detected based on predefined criteria
• Promptly inform FIU-IND of any suspicious transactions or attempted suspicious transactions
• Suspicious Transaction Reports (STRs) must contain complete and accurate information about key factors including client KYC, wallets, transactions, counterparties, and grounds of suspicion.

Suggested read: Suspicious Transaction Reports (STRs): The Latest Guidance for Regulated Businesses

Digital rupee: RBI's CBDC vs private crypto

The Digital Rupee, or e₹, is the digital form of India’s currency, also referred to as its “Central Bank Digital Currency” or “CBDC”. The Reserve Bank of India issues it with a value equal to its physical equivalent.

The Digital Rupee is currently in pilot tests across the country and can be used to send and receive money and make payments.

Because the Digital Rupee has official backing, it is legal tender in India, unlike private cryptocurrencies.

New crypto reporting rules and CARF in India

In July 2026, the Central Board of Direct Taxes (CBDT) issued a guidance note operationalizing India's crypto-reporting obligations under Section 509 of the Income-tax Act, 2025, read with Rules 241 to 244 and Form 167 of the Income-tax Rules, 2026. The guidance does not create a new tax or change how virtual digital assets are taxed. What it changes is who carries the reporting burden. Reporting Crypto-Asset Service Providers (RCASPs), rather than individual investors, must now establish users' tax residency, apply due diligence tied to their existing KYC and AML records, and report specified crypto-asset transactions in a standardized format.

This aligns India with the OECD's Crypto-Asset Reporting Framework (CARF), the global standard developed at the G20's request to enable automatic exchange of crypto-transaction data between participating jurisdictions. The first reporting period runs from calendar year 2026, with initial filings due by May 31, 2027, after which India will begin receiving reciprocal information on its residents' offshore crypto activity from other CARF countries.

Why crypto regulation matters in India

Crypto regulation provides a legal framework to protect investors from fraud and ensure the market operates transparently. Without regulation, the cryptocurrency market could be prone to manipulation and illicit activities. Recent cases of money laundering through crypto include:

1. Delhi Firm Investigation: A Delhi-based company was found to have sold cryptocurrencies worth over ₹1,858 crore (220 million USD), triggering an ED investigation. The agency discovered that the accused had made illegal foreign remittances exceeding ₹3,500 crore (417 million USD), linked to a hawala racket that transferred illicit money to offshore tax havens.
2. Bitconnect Coin Case: The ED provisionally attached assets worth ₹433 crore in connection with a money laundering case linked to Bitconnect Coin. The investigation revealed that the promoters had induced investments through fraudulent schemes, leading to significant financial losses for investors.

Regulation can help integrate cryptocurrencies into the broader financial system. Through regulation, the Indian government also generates revenue through taxation and creates a controlled environment for the development of blockchain technology. 

The future of crypto adoption in India

India's position is unusual. It leads the world in grassroots adoption, yet it maintains one of the harshest tax regimes and still lacks a single dedicated statute regulating crypto as a financial product. VDAs are governed through tax provisions, PMLA, FIU‑IND guidelines and sectoral rules. That contradiction, not a generic "promising but uncertain," will shape the next few years, and it turns on three things.

Tax comes first, because it already bends behavior. The 30 percent levy on gains and the 1 percent TDS on every transfer, retained again in the February 2026 Budget, have pushed most Indian trading offshore: 72.66% of FY25 volume, roughly $6.1 billion, occurred on international exchanges. The tax also warped what stays onshore. Derivatives escape the TDS, so futures and derivatives now make up more than 80% of volume on Indian exchanges, and spot trading has dropped by as much as 85% since 2022. Industry bodies want the TDS cut to 0.1 percent and losses to be deductible, but the government has held the regime firm and instead added penalties. Onshore adoption hinges on whether that loosens. 

Second is a standoff inside the government. The long-promised regulatory discussion paper was shelved again in April 2026, with the RBI's opposition cited as the reason, and in July the central bank told Parliament crypto should not be legalized and pressed the Digital Rupee as the alternative. SEBI, the ICAI and the tax apparatus favor a regulated framework instead. The old 2021 bill matters here only for what it signals: never enacted, and effectively superseded by tax and AML measures rather than a dedicated crypto product statute. The likely outcome is more monitoring and structured regulation, not a dedicated law and not a ban.

Third is external pressure. India's stance sits increasingly at odds with the US GENIUS Act, the EU's MiCA regime, and the UK's emerging rules. The RBI's June 2026 Financial Stability Report referenced all three without accompanying criticism, a small shift from its earlier tone, and a debate over rupee-backed stablecoins has opened alongside it.

Whatever shape the rules eventually take, the compliance baseline for anyone handling VDAs, stablecoins included, is already fixed, and it starts with knowing your customer.

Crypto compliance checklist: KYC requirements for VDA service providers in India

To meet India's crypto obligations, VDA SPs and other regulated entities handling virtual digital assets should:

☐ Register with FIU-IND as a reporting entity, where required.

☐ Verify customer identities before onboarding using officially accepted documents, such as Aadhaar, PAN, a passport, or a voter ID.

☐ Apply a risk-based approach to customer due diligence (CDD), tailoring KYC and transaction monitoring to each customer's risk profile.

☐ Conduct enhanced due diligence for high-risk customers and politically exposed persons (PEPs), and identify beneficial owners for corporate customers.

☐ Monitor customer transactions on an ongoing basis, investigate suspicious activity, and file suspicious transaction reports with FIU-IND when required.

☐ Maintain customer identity and transaction records for at least five years in accordance with the PMLA.

☐ Appoint a Principal Officer responsible for AML/CFT compliance and communication with FIU-IND and other competent authorities.

☐ Establish and maintain internal AML/CFT policies, employee training programs, independent audits, and compliance controls aligned with the PMLA and applicable RBI or SEBI requirements.

Crypto Industry Report 2026

Crypto is entering its regulated maturity era. Learn about the state of the crypto industry in the 2026 report Sumsub’s experts have made for you.

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FAQ

• Is cryptocurrency legal in India?

  Cryptocurrency is not banned in India, but it’s not legal tender.

• Is Bitcoin legal in India?

  There is currently no ban on buying, holding, or selling Bitcoin in India, but it is not legal tender. It is treated as a taxable virtual digital asset rather than currency.

• Is cryptocurrency regulated in India?

  Yes. Crypto operators have to comply with local AML and tax regulations.

• What is a VASP under Indian law?

  India uses the term Virtual Digital Asset Service Provider (VDA SP) rather than VASP (or “Virtual Asset Service Provider”), which is more widely used internationally and is a FATF standard. A VDA SP is an entity that engages in exchanging VDAs for fiat currencies and vice versa, exchanging one or more forms of VDAs for others, transferring VDAs, safekeeping or administration of VDAs or instruments enabling control over VDAs, and/or participating in and providing financial services related to an issuer’s offers and sales of VDAs.

• What are virtual digital assets in India?

  Virtual digital assets (VDAs) are defined under Section 2(47A) of the Income Tax Act, 2025 as information, numbers, codes, or tokens that are not Indian or foreign currency but that promise or represent inherent value, store value, or act as a unit of account and can be transferred, stored, or traded electronically. The definition also covers non-fungible tokens (NFTs) and similar tokens, as well as other digital assets. It further includes crypto-assets that represent value digitally and rely on a cryptographically secured distributed ledger or equivalent technology.

• Do crypto exchanges need to register with FIU-IND?

  Crypto exchanges and other VDA service providers that carry on the notified VDA activities in or from India must register with FIU‑IND as reporting entities.

• How does the crypto Travel Rule apply in India?

  The FATF Travel Rule is implemented in India under the Prevention of Money Laundering Act, 2002 (PMLA). This means VDA SPs and financial institutions in India must collect, verify, and share sender and receiver data for crypto transactions.

• Is KYC mandatory for crypto exchanges in India?

  Yes, Know Your Customer (KYC) is a requirement for crypto exchanges in India under the country’s AML regulations.

• Who is a reporting entity under the PMLA?

  Under the PMLA, reporting entities include banking companies and co-operative banks covered by the Banking Regulation Act, 1949, as well as chit fund companies, housing finance institutions, payment system operators, non-banking financial companies, and persons carrying on the VDA activities notified under S.O. 1072(E) of March 7, 2023.