India’s cryptocurrency regulatory framework faces growing scrutiny as investors increasingly shift toward derivatives trading despite strict taxation and anti-money laundering requirements. While authorities have introduced measures to monitor digital assets, expanding trading activity and cross-border transactions expose potential regulatory gaps.
Crypto Taxation Fails to Restrict Trading
India introduced a 30% tax on cryptocurrency gains and a 1% tax deducted at source (TDS) on qualifying virtual digital asset (VDA) transfers in 2022. Following implementation, trading volumes on certain domestic exchanges reportedly declined by approximately 70%.
However, cryptocurrency futures and options have gained popularity as their tax treatment differs from spot transactions.
According to industry reports, derivatives now represent more than 75% of trading activity on domestic cryptocurrency platforms. Profits from these instruments are commonly treated as business income, creating potential tax advantages compared with spot cryptocurrency transactions.
Enforcement Directorate Investigates Crypto Platforms
Cryptocurrency transactions also present concerns regarding unauthorized overseas fund transfers and financial crime. In November 2026, India’s Enforcement Directorate searched premises associated with CoinDCX and Delta Exchange India over alleged violations of the Foreign Exchange Management Act.
Earlier investigations involved platforms including WazirX and ZebPay. Authorities have examined suspected money laundering, unauthorized cross-border payments and cryptocurrency transactions involving foreign entities.
These investigations highlight challenges in monitoring digital assets moving across international platforms.
Smaller Cities Drive Cryptocurrency Adoption
Cryptocurrency participation has expanded beyond India’s metropolitan markets. According to reported transaction data, North 24 Parganas recorded approximately 33,000 cryptocurrency users and Rs. 2,000 crore in transaction value during FY26.
Chennai recorded around 19,100 users and Rs. 600 crore during the same period.
ZebPay reported that tier-2 and tier-3 cities contributed approximately 62% of new registrations during the first half of 2026, including 21% from tier-3 locations.
FIU Compliance and Regulatory Challenges
Since March 2023, cryptocurrency service providers have faced anti-money laundering obligations under the Prevention of Money Laundering Act.
Platforms must register with India’s Financial Intelligence Unit and maintain customer verification, transaction records and reporting procedures. Authorities reportedly ordered restrictions against 53 noncompliant platforms.
Meanwhile, cryptocurrency-related tax collections reached Rs. 512 crore in FY25, compared with Rs. 363 crore in FY24 and Rs. 221 crore in FY23. The numbers continue the debate over tax effectiveness.
Stronger derivatives oversight, investor safeguards and international regulatory coordination could help address emerging risks without forcing cryptocurrency activity onto unregulated offshore platforms.
Also Read: India’s ED Searches CoinDCX and Delta Exchange Over Alleged Cross-Border Crypto Trading
Disclaimer : Crypto News India does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.
