An unfavourable regulatory environment and heavy taxation are not stopping crypto adoption in India.
The country has ranked first in global crypto adoption for two years in a row, with millions of Indians trading digital assets.
While the government maintains a tough stance, trading volumes have surged, particularly in smaller cities. The rapid adoption is driven by economic pressures, changing investment habits, and global developments.
Although many still believe that crypto adoption is lacking behind in India, the numbers may suggest otherwise.
Crypto trading is booming in India despite heavy taxes
India has one of the world’s strictest crypto tax policies.
Profits are taxed at 30%, and every transaction is subject to a 1% tax deducted at source (TDS).
In 2025, new penalties were introduced, including fines of up to 70% for undeclared crypto holdings.
These measures were meant to discourage trading, yet they have done little to slow down the market.
Crypto trading volumes on India’s top four exchanges doubled in the last quarter of 2024, reaching $1.9 billion, according to CoinGecko.
Source: Reuters
New traders, especially from non-metro cities, are entering the market in large numbers.
With job growth slowing and wages stagnating, many young Indians see crypto as an alternative income stream.
As more people seek financial opportunities outside traditional markets, digital assets are becoming an attractive with many neglecting the high costs.
Smaller cities are leading the charge
Once dominated by metro hubs like Mumbai and Delhi, India’s crypto activity is now growing fastest in smaller cities.
Jaipur, Lucknow, and Pune were among the top 10 crypto trading centers in 2024, according to CoinSwitch.
This indicates that people in smaller cities are looking for new ways to invest and earn.
Traditional employment opportunities have not kept pace with India’s economic growth.
With 40% of the country’s population under the age of 25, many young Indians are turning to crypto for financial security.
Some are leaving stock derivatives behind due to tighter regulations and moving to crypto trading instead.
Local crypto education academies are also gaining popularity, training people in digital asset trading.
This grassroots movement is reshaping the country’s financial landscape.
Is India being influenced by global events?
India’s crypto policies are now being re-evaluated in response to global developments.
The election of US President Donald Trump in November 2024 is forcing a change in international crypto regulation.
Trump has taken a more favourable stance on digital assets, leading to renewed global confidence in the sector.
The Indian government, which had planned to release a discussion paper on crypto regulations in 2024, has delayed its decision.
Economic Affairs Secretary Ajay Seth acknowledged that India cannot take a unilateral stance on crypto, as it is a global asset class.
Moreover, the recent rapid adoption has drawn concerns from the Reserve Bank of India (RBI), which remains firmly opposed to private cryptocurrencies.
The central bank has repeatedly warned that widespread crypto usage poses macroeconomic risks, including threats to financial stability and capital outflows.
In its December 2024 Financial Stability Report, the RBI emphasized that crypto assets, particularly stablecoins, could disrupt monetary policy and lead to financial instability.
The bottom line is that while the RBI remains strongly opposed, the government is reconsidering its approach.
This could mean changes in policy over the next few years, though not exactly certain.
Exchanges are trying to return
While Indian traders continue to invest in digital assets, many have moved to foreign exchanges to avoid the 1% TDS.
This situation has led the Financial Intelligence Unit (FIU) to crack down on unregistered platforms.
In June 2024, Binance was fined $2.25 million for failing to comply with Indian regulations.
Other exchanges, like KuCoin, were also penalized.
More recently however, major exchanges are trying to re-enter the Indian market.
Coinbase, which had ceased operations in India, is now in talks with regulators for a possible return.
For large exchanges to return, it all comes down to regulatory clarity.
If the government shifts toward a more structured approach, domestic exchanges could see a revival.
The risks and the road ahead
According to a report by Chainalysis, India’s crypto market is projected to grow from $2.5 billion to $15 billion by 2035.
That’s an annuall growth rate of 18.5%.
This suggests that despite the current regulatory uncertainty, there is significant long-term potential for digital assets in the country.
However, security issues are a major concern, highlighted by the 2024 WazirX hack, which led to a $235 million loss.
Investors were left stranded as withdrawals were frozen, exposing the lack of consumer protection in India’s crypto space.
Unlike markets in the US and EU, where regulations are evolving to protect investors, India has yet to introduce similar safeguards.
There is also the question of long-term government policy. While crypto adoption continues to rise, high taxation and regulatory uncertainty still pose challenges.
If the government takes a more favorable stance, the market could expand further.
If restrictions tighten, more investors may shift to offshore platforms.
For now, crypto remains a fast-growing part of India’s financial ecosystem.
The country’s younger population, economic shifts, and global influences are shaping a market that continues to defy expectations.
Whether India embraces digital assets or continues to push back, crypto’s presence is now deeply embedded in its economy.
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