India Reconsiders Crypto Stance Amid Shifting Global Regulatory Landscape

India is reportedly re-evaluating its position on cryptocurrencies as other countries adjust their regulatory approaches. According to Reuters, the reassessment could lead to further delays in releasing a long-anticipated discussion paper on digital assets, initially expected in September 2024.

India Reassessing Cryptocurrency Stance

Economic Affairs Secretary Ajay Seth highlighted that various jurisdictions have revised their perspectives on cryptocurrency, particularly its role, adoption, and significance. In response, India is reviewing its approach. Seth emphasized that since digital assets operate without borders, India’s policies cannot be shaped in isolation.

While he did not reference the United States directly, Seth’s remarks follow recent crypto-related actions by former U.S. President Donald Trump. Last week, Trump established a cryptocurrency working group to develop new regulations and explore the possibility of a national cryptocurrency stockpile, fulfilling his earlier commitments to reform U.S. digital asset policies.

India’s Regulatory Scrutiny

Despite India’s strict regulatory stance and high taxes on crypto transactions, participation in the sector has surged. Authorities have maintained close oversight, with the Financial Intelligence Unit (FIU) issuing show-cause notices to nine offshore cryptocurrency exchanges in December 2023 for non-compliance with local regulations.

Among those affected was Binance, the world’s largest crypto exchange. In June 2024, the company received a $2.25 million fine, shortly after registering with the FIU in an attempt to restore its operations in India. However, its regulatory challenges did not end there.

Meanwhile, in August 2024, the Directorate General of Goods and Service Tax Intelligence (DGGI) issued Binance an $86 million tax notice. According to the notice, Binance collected fees from Indian customers but failed to pay applicable taxes between July 2017 and March 2024. 

Additionally, reports indicate that the exchange generated over $476 million in transaction fees, transferring the funds to Nest Services Limited, a Seychelles-based entity under the Binance Group. A source familiar with the matter stated that Binance had contested the tax notice, arguing that it complies with all relevant domestic laws.