India's Crypto Conundrum: Experts Say India Must Catch Up Amidst the ambiguity, industry leaders opine that India's next big step should be toward a structured and modular regulatory framework.

India's Web3 and crypto industry remains in a limbo as the government's position has remained rather intriguing - neither has it completely banned digital assets, nor has it established any framework to regularise. Though it has leveraged existing anti-money laundering and KYC provisions under FIU-IND, which mainly treat exchanges as "reporting entities", to create oversight of the ecosystem.

According to recent regulatory filings, more than 30 platforms, including global majors such as Binance, CoinDCX, and KuCoin, have registered with FIU-IND in 2025. The tax environment remains among the strictest in the world: as much as 30 per cent tax on gains and a 1 per cent TDS on transactions above the specified threshold, and no provisions for offsetting losses.

From the central government's side, things have been far from clear. Earlier this year, Pankaj Chaudhary, Union Minister of State for Finance, informed the Parliament that "at present, crypto / virtual assets are not regulated in India" and therefore "the question of the legality or illegality of specific crypto platforms does not arise as of date."

Earlier, Nirmala Sitharaman, Union Finance Minister, had previously emphasized that India will not automatically emulate other formulas, and the approach will be determined by "what works for India." In early 2025, she told the media after the Budget Round Table:

"We are India. I'll think about India," highlighting that regulatory and policy decisions on crypto will be driven by domestic conditions, rather than global trends.

Amidst the ambiguity, industry leaders opine that India's next big step should be toward a structured and modular regulatory framework.

SB Seker, Head of APAC at Binance, told Entrepreneur India at the sidelines of India Blockchain Week 2025, why such a framework is essential. "For a regulatory framework to make sense for digital assets, it's got to take into account the unique nature of digital asset businesses. In a traditional stock exchange, payment system, or even banking, there are several counterparties that all need to work together. But in the digital asset space, you have basically done away with that paradigm."

He pointed out that a centralized exchange today performs functions that are split across multiple entities in traditional finance. For example, Binance does user onboarding, buy/sell trade, matching engine, provides liquidity, clears settlement, and does custody. Because of that, he said, regulation must specify the nature of each entity and the specific functions it performs.

According to Seker, jurisdictions with mature crypto policy frameworks license and regulate verticals separately. "Once the regulators ask questions about the kind of entity, they can also determine what products an entity is permitted to offer."

He cited instances where countries issue separate licenses for activities like crypto payments, requiring non-cash payment facility licenses, or for staking-related products because of their distinct risk profile. The modular approach, he says, leaves enough room for new products to come through without forcing regulators into reactive policymaking.

India's Opportunity

While exchanges want to emphasize regulatory coherence and clarity, blockchain infrastructure builders see India's strength in a different place - product innovation.

Avery Ching, co-founder and CEO of Aptos, believes the tide has turned in this cycle. "There's a speculation cycle around crypto tokens as new assets. And less focus on actual product building. And I think this is where India flips it around, where they're really focused on product building and not so much on the speculative assets of tokens," Ching told Entrepreneur India.

According to him, engineers and entrepreneurs in India are using blockchain as a way to build globally relevant tools, on top of instruments for trading.

Ching said that the public sector is experimenting aggressively with blockchain infrastructure. He revealed that Aptos is working with a state government on on-chain credentialing systems for students, enabling verifiable resume-building with more than 20,000 students already participating.

The company is also engaged in pilots with central ministries on rural programs. He said this has to reflect India's broader attitude toward technological disruption.

"I think the Indian government is not afraid to disrupt things. UPI is a great example of that. And I like the approach that they're taking so far with blockchain to explore different avenues of use cases and utility."

Capital, But Out of Reach

In the venture and funding landscape, however, the picture remains subdued. According to 2025 research datasets from Chainalysis and global VC trackers, Web3 funding in India declined by double digits year-on-year, reflecting a broader global slowdown. According to a recent Tracxn report, Indian blockchain startups bagged USD 124 million in 2024, but only managed to attract USD 9.92 million as of November 2025.

Edul Patel, co-founder and CEO of Mudrex, told Entrepreneur India, this is part of a worldwide trend rather than an India-specific event.

Tak Lee, CEO and Managing Partner of Hashed Emergent, presented a keynote at the India Blockchain Week 2025, which revealed that Indian investors are on the sidelines while foreign investors are ready to bet big on Indian developers. This comes despite India's ranking number one in global crypto adoption, moving from 16th to 2nd place globally in web3 developers over the last decade, and one in five new web3 developers worldwide being Indian.

Indian venture capital has over USD 20 billion in unallocated capital, but less than 1 per cent goes to web3, according to Hashed Emergent's report, which attributes the lull to a conviction problem rather than a capital one.

Despite the funding gap, Edul Patel pointed to robust growth in the actual Web3 ecosystem. "What we are seeing is that now more and more and more products and more and more and more applications are coming, offering stablecoins, offering payments, offering money movement, offering banking, yield, etc." In his view, crypto is transitioning from an asset class to infrastructure for a new financial system.

Patel is also clear on what is holding capital back.

"There is regulatory uncertainty. And this is not only true for crypto or Web3. Regulatory uncertainty is true as a general gap with India. As the regime becomes more stable, hopefully more capital will come in."