Regulatory Challenges of Crypto-currency (Bitcoin) in India: Legal and Financial Perspectives

DOI

10.2991/978-2-38476-515-7_29How to use a DOI?

Keywords

Bitcoin; Cryptocurrency Regulation; RBI; Supreme Court; India; Financial Law; Taxation; CBDC; Blockchain

Abstract

The phenomenon of Bitcoin as a decentralized digital asset has become relevant around the world as crypto currency; it is disruptive of financial systems. Nevertheless, its regulation is a controversial challenge, particularly in India, where policy makers are faced with legal ambiguities, financial risks and technological challenges. Whereas various nations have embraced the regulatory frameworks to incorporate crypto currencies in their economies, India has gone about this cautiously by alternating between the restrictive measures and the necessity of innovation in the financial sector.

This paper will discuss the major regulatory issues related to Bitcoin in India, including legislative uncertainty, risk of financial crime, tax issue, and the policy of the reserve bank of India (RBI). This was a great setback to the industry as in 2018 the RBI issued a circular banning the banks to conduct business with crypto currency related enterprises, leaving the exchanges and investors in doubt. But in March 2020, the Supreme Court of India quashed this ban on the basis of the disproportionate limitation imposed on businesses in the Indian Constitution of Article 19(1)(g). Regardless of this judicial reprieve, there is no specific crypto currency law in place which remains a major challenge.

Among the main issues related to Bitcoin that regulators are concerned about is the possible misuse of Bitcoin to commit money laundering, tax evasion, and illegal transactions because it is pseudonymous. Financial Action Task Force (FATF) has promoted the importance of effective KYC (Know Your Customer) and AML (Anti-Money Laundering), which explains why the Indian regulators have given stronger compliance requirements. Besides, the tax on crypto income was increased to 30 percent in 2022 and the tax on transactions is 1 present, which also adds new obstacles to traders and investors and casts doubts on the sustainability of the industry in the long run.

The regulatory dilemma in India is affected by the fact that the RBI is also interested in a Central Bank Digital Currency (CBDC) that can be supported by the state as an alternative to decentralized crypto currencies. However, whereas CBDCs will be more stable and regulated by the government, it is not as decentralized and private as Bitcoin is. This paper will examine international regulatory systems, including those of the United States, the European Union and Singapore to propose a moderate system to be used in India.

It is stated in the paper that a strict set of restrictions should not be enforced in India but, rather, a clear, technology-centered regulatory framework should be adopted that not only contributes to innovation but also provides financial security. Setting legal parameters, implementing consumer protection policies and promoting responsible innovation will serve to ensure that India can use blockchain technology without interfering with the economic stability.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Tabrez Ahmad
AU  - Mohammad Muzammil
AU  - Uzair Ahmad Shaikh
PY  - 2025
DA  - 2025/12/26
TI  - Regulatory Challenges of Crypto-currency (Bitcoin) in India: Legal and Financial Perspectives
BT  - Proceedings of the International Conference on Law and Technology (ICLT 2025)
PB  - Atlantis Press
SP  - 325
EP  - 336
SN  - 2352-5398
UR  - https://doi.org/10.2991/978-2-38476-515-7_29
DO  - 10.2991/978-2-38476-515-7_29
ID  - Ahmad2025
ER  -