Crypto Not Banned or Regulated in India, But Offshore Exchanges Being Monitored, Says Govt

As cryptocurrency popularity grows in India, issues about their legal status and regulation continue to raise uncertainty. The government clarified that current laws do not prohibit cryptocurrency trading. While it added that offshore platforms are being brought under oversight through the Financial Intelligence Unit (FIU-IND) to ensure compliance with anti-money laundering norms.

Government Clarifies Legal Stand on Crypto Platforms

In response to a parliamentary question, Minister of State for Finance Pankaj Chaudhary stated that cryptocurrencies and virtual digital assets (VDAs) are currently not regulated under Indian law. The question of the legality or illegality of specific crypto platforms does not arise at present.

The Financial Intelligence Unit (FIU-IND), India's agency for tracking suspected financial transactions, monitors compliance with the Prevention of Money Laundering Act (PMLA). All Virtual Asset Service Providers (VASPs), even those situated overseas but serving Indian customers, must register with the FIU-IND.

While the government has not conducted a formal study or issued a list of illegal offshore platforms, it keeps an updated record of non-compliant VASPs as part of its ongoing oversight efforts.

Pankaj said that to increase transparency and accountability in crypto transactions, the Finance Act, 2022, introduced Section 194S in the Income-tax Act. This provision mandates a 1 per cent Tax Deducted at Source (TDS) on the transfer of Virtual Digital Assets (VDAs). It applies to all such transactions, including those involving offshore entities, if the income is chargeable to tax in India.

He further stated that although the government has not launched any dedicated awareness campaign specifically focused on illegal offshore crypto platforms, the Reserve Bank of India (RBI) has issued broader advisories. These advisories caution users, holders, and traders of virtual currencies about risks such as economic, legal, operational, and security-related threats. However, they do not name or directly target individual platforms.

This indicates that while the government has not imposed a ban on crypto trading, it is increasing oversight and urging users to exercise caution, especially when dealing with offshore platforms without recognising any specific platform.