Crypto in India sits in an unusual position: it is not legal tender and has no dedicated law of its own, yet it is not banned, it is taxed at a flat rate, and the businesses that serve users are regulated under anti-money-laundering law. This guide explains how that position developed and what it means in practice, reflecting the rules as of October 2026.
The short answer and key definitions
Buying, selling and holding crypto is not illegal in India. However, crypto is not legal tender, so no one is required to accept it as payment, and the Reserve Bank of India has not authorised any cryptocurrency as a medium of payment. Income from crypto is taxed under the virtual digital asset regime, and platforms serving Indian users must register with the Financial Intelligence Unit-India (FIU-IND).
What India does not yet have is a comprehensive law that sets out how crypto platforms are licensed, how investors are protected, or how stablecoins are treated. That gap is why the position is often described as taxed and monitored but not fully regulated.
RBI's cautions and the 2018 circular
The RBI issued public cautions about virtual currencies in December 2013, February 2017 and December 2017, warning users of economic, financial, legal, operational and security risks.
On 6 April 2018, the RBI went further. Its circular titled Prohibition on dealing in Virtual Currencies directed banks and other regulated entities not to deal in virtual currencies or provide services to any person or business dealing in them, and gave existing customers three months to exit. In practice, this cut off crypto exchanges from the Indian banking system and made rupee deposits and withdrawals very difficult.
The 2020 Supreme Court ruling
Exchanges and the Internet and Mobile Association of India challenged the circular. On 4 March 2020, in Internet and Mobile Association of India v. Reserve Bank of India, the Supreme Court set aside the 2018 circular. The Court accepted that the RBI has power to regulate in this area but found the banking restriction disproportionate on the facts before it.
The judgment did not declare crypto to be legal tender or create a regulatory framework. It removed the banking prohibition. In May 2021, the RBI issued a further circular telling regulated entities not to cite the set-aside 2018 circular, while confirming they should continue customer due diligence under KYC, anti-money-laundering, PMLA and foreign exchange rules.
Taxed since 2022
The Finance Act, 2022 introduced a specific tax regime for virtual digital assets: a flat 30% tax on income from transfers, with no deduction except the cost of acquisition and no set-off of losses, and a 1% TDS on transfers. Taxing an activity is not the same as approving or regulating it, but it confirmed that holding and trading crypto is a recognised, taxable activity.
Since then, crypto platforms registered in India have had to deduct TDS on sell orders and report it against users' PANs, which gives the Income Tax Department a detailed view of domestic trading. Offshore activity is not exempt: Indian residents must still report VDA income from every platform they use, and the department can compare returns with the information it receives from reporting entities.
The regime continues under the Income-tax Act, 2025, which replaced the 1961 Act from 1 April 2026. Budget 2025 added crypto-asset transaction reporting by prescribed entities, and Budget 2026 added penalties for reporting entities that fail to file those statements or file inaccurate ones. See our guide to crypto tax in India for details.
PMLA coverage and FIU-IND enforcement
On 7 March 2023, the government notified activities involving virtual digital assets under the Prevention of Money-laundering Act, 2002. Businesses that, on behalf of others, exchange VDAs for fiat currency, exchange one VDA for another, transfer VDAs, provide safekeeping or administration of VDAs, or provide financial services related to a VDA issuer's offer became reporting entities. They must register with FIU-IND, verify customers, keep records and report suspicious transactions.
FIU-IND has stated that these obligations depend on the activity carried out, not on physical presence in India. That means offshore exchanges serving Indian users are covered too.
In December 2023, FIU-IND issued show cause notices to nine offshore VDA service providers operating in India without registration and asked the Ministry of Electronics and Information Technology to block their websites. Further rounds followed: notices to 25 offshore providers in October 2025 and to 15 providers in September 2026, with takedown notices for their apps and websites.
FIU-IND has also imposed monetary penalties, including ₹9.27 crore on one offshore exchange in January 2025 for operating without registration. Several offshore platforms have since registered. For users, the practical lesson is that a platform's availability in an app store does not by itself mean it is compliant in India.
Indian law does not define cryptocurrency as such. The Income-tax Act uses the broader term virtual digital asset, which covers crypto tokens, non-fungible tokens and similar digitally generated assets, and the Finance Act, 2025 widened it to expressly include crypto-assets that rely on a cryptographically secured distributed ledger. The PMLA notification of March 2023 uses the same concept of virtual digital assets to decide which businesses must register with FIU-IND.
Because the definitions come from tax and anti-money-laundering law rather than from a dedicated crypto statute, they tell you how crypto is taxed and which intermediaries are supervised, but not whether a particular token is a security, a commodity or a payment instrument. Those questions remain open in India.
Common myths about crypto and the law
Much of the confusion about crypto in India comes from mixing up three different questions: whether it is legal to hold, whether it is regulated, and whether it is protected. The answers are yes, partly, and largely no.
Myth: crypto is banned in India. It is not. The 2018 banking restriction was set aside in 2020, and no later law has prohibited buying, selling or holding crypto.
Myth: because crypto is taxed, it is fully regulated. Taxation and anti-money-laundering registration are not the same as a licensing and investor protection regime. There is no deposit insurance or dedicated grievance mechanism for crypto holdings, and platform failures or hacks can leave users with limited recourse.
Myth: an offshore app is outside Indian rules. FIU-IND has stated that registration depends on serving Indian users, not on where the company is based, and Indian residents remain liable to report and pay tax on their VDA income wherever they trade.
Myth: crypto can be used freely as money. It is not legal tender, so shops and lenders are not obliged to accept it, and using crypto to pay for goods or services is itself a taxable transfer of a VDA.
Is there a crypto bill or discussion paper?
As of October 2026, India has not enacted a dedicated law to regulate or ban cryptocurrencies. In a written reply to the Lok Sabha in February 2023, the government said that because crypto assets are borderless, any effective legislation for regulation or prohibition would need significant international collaboration.
A government discussion paper on crypto policy has been widely reported as being in preparation, and parliamentary committees have taken evidence on the subject, but we could not confirm the publication of an official paper or a bill at the time of writing. Treat reports of an imminent ban or an imminent licensing regime with caution until there is an official notification, a bill introduced in Parliament, or a press release from the Ministry of Finance or the RBI.
What this means for you
If you choose to invest, use platforms that are registered with FIU-IND and complete KYC, report your VDA income and claim your TDS credits correctly, and avoid offshore platforms that have been named in FIU-IND notices. Do not treat crypto as protected in the way a bank deposit or a SEBI-regulated security is, because there is no dedicated investor protection framework for crypto in India.
Keep records of every deposit, trade and withdrawal, and be wary of anyone who claims a platform is government approved or offers guaranteed returns. Registration with FIU-IND is an anti-money-laundering requirement, not an endorsement of the platform or a guarantee of its solvency.
Rules in this area can change quickly. Check official sources such as the RBI, FIU-IND, the Income Tax Department and the Press Information Bureau for updates.
Important note
This guide summarises the legal and regulatory position as of October 2026 and is general information, not legal or tax advice. Consult a qualified lawyer or tax professional for advice on your specific situation.
Frequently asked questions
Is crypto banned in India?
No. As of October 2026 there is no law banning the purchase, sale or holding of crypto in India. It is not legal tender, but it is taxed, and platforms must register with FIU-IND under the anti-money-laundering law.
Is bitcoin legal tender in India?
No. Bitcoin and other cryptocurrencies are not legal tender in India, and the RBI has not authorised them as a medium of payment. No one is obliged to accept them for goods, services or debts.
What did the Supreme Court decide in 2020?
On 4 March 2020, in Internet and Mobile Association of India v. Reserve Bank of India, the Supreme Court set aside the RBI's 2018 circular that had stopped banks from serving crypto businesses, finding the measure disproportionate.
Do offshore crypto exchanges need to register in India?
Yes. FIU-IND has said the PMLA obligations for VDA service providers depend on the activity, not physical presence, so offshore platforms serving Indian users must register. Several have received notices and had their websites blocked.
Is there a crypto bill in India in 2026?
We could not confirm any crypto bill introduced in Parliament or an official discussion paper published as of October 2026. Check official government sources for any change.
Disclaimer: This article is for general education and informational purposes only. It is not investment, legal or tax advice. Crypto assets and derivatives involve substantial risk.