The new US administration has firmly embraced crypto assets, signaling their permanence in global finance. Trump’s re-election has injected fresh optimism into the market, with Bitcoin soaring past $100K. While countries like Vietnam pushes for swift regulatory clarity and the EU’s MiCA framework sets global standards through the “Brussels effect,” India remains on the sidelines, still awaiting a discussion paper. As major economies shape the future of digital assets, the question remains — will India seize the moment or risk falling behind in the crypto revolution?
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The crypto narrative is a modern-day epic. It began in 2008 with the publication of a white paper by Satoshi Nakamoto, an individual or group whose identity remains shrouded in mystery. Bitcoin emerged as a digital counterpoint to traditional finance — a decentralised response to the global financial crisis that exposed deep flaws in the banking system. In its early days, much like the first Model T Ford, Bitcoin was a curiosity, understood only by a niche group of technologists and libertarians. Today, just over a decade and a half later, crypto is a force to be reckoned with, challenging financial norms and attracting global interest.
The journey, however, has been far from smooth. Wild price swings, dramatic collapses such as the FTX debacle, and regulatory crackdowns have frequently punctuated crypto’s rise. Yet, the underlying technology — blockchain — has proven its resilience, evolving from a niche digital currency infrastructure to a transformative tool powering applications from supply chain management to decentralised finance (DeFi). India has witnessed a surge in crypto adoption, driven by its vast young population and a strong digital economy. However, regulatory uncertainty continues to loom large.
The Reserve Bank of India (RBI) has consistently expressed concerns over crypto’s potential to disrupt monetary policy, facilitate illicit transactions, and threaten financial stability, with their pessimism permeating through the Indian government over the years. This scepticism has translated into cautious policy measures, including high taxation (a 30 per cent tax on crypto gains), withholding tax deductions, and compliance mandates. These regulations have created an environment of uncertainty, making India a less attractive destination for blockchain entrepreneurs and investors.
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As global economies move towards clearer regulatory frameworks, India faces a critical decision: Should it embrace this innovation with well-defined policies, or impose restrictive measures that risk driving talent and capital elsewhere? A balanced approach — one that allows crypto assets to function within a regulated framework while promoting India’s own Central Bank Digital Currency (CBDC) — could position the country as a leader in the digital financial revolution rather than a reluctant observer.
Looking beyond India, global regulatory approaches offer valuable insights. El Salvador made headlines in 2021 by becoming the first country to adopt Bitcoin as legal tender. While its experiment has faced criticism over price volatility and limited public adoption, it underscores crypto’s potential to drive financial inclusion, particularly in regions where traditional banking infrastructure is weak.
Contrast this with Switzerland, a nation renowned for its financial acumen. The Swiss have embraced crypto with a well-defined regulatory framework, ensuring investor protection while fostering blockchain innovation. Switzerland’s “Crypto Valley” in Zug has become a hub for blockchain startups, demonstrating that regulation need not stifle growth but can, in fact, enable it. Similarly, the United Kingdom’s Financial Conduct Authority (FCA) is actively engaging in discussions to strike a balance between consumer protection and technological advancement.
The shifting stance of the United States is also noteworthy. While it initially oscillated between regulatory crackdowns and innovation-friendly policies, the recent trend leans toward fostering a stable environment for crypto businesses. Clearer regulations on stablecoins, greater institutional involvement, and reduced regulatory ambiguity have encouraged investment. If the US continues on this path, it could attract significant global capital in the crypto space, leaving India in a position where it must decide whether to adapt or risk losing out on a thriving sector.
India has historically been a cautious but calculated adopter of new financial technologies. The Unified Payments Interface (UPI) is a prime example of how the country successfully embraced digital payments, creating a seamless, scalable, and globally recognised system. A similar approach can be taken with crypto assets — neither outright rejection nor unregulated adoption, but a structured framework that encourages responsible growth.
To achieve this, India can take decisive steps:
• Regulatory clarity: a comprehensive crypto regulation bill must differentiate between crypto assets on use cases
• Investor protection: establishing mechanisms for dispute resolution, fraud prevention, and risk disclosures will ensure that retail investors are protected from bad actors
• Stablecoin and CBDC integration: India’s digital rupee initiative (CBDC) can coexist with crypto assets, provided there is a clear regulatory distinction and interoperability guidelines
• Taxation reform: The current high tax regime is pushing businesses offshore. A more balanced tax structure can encourage domestic innovation while ensuring government revenue
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• Public-private collaboration: Engaging with industry leaders, blockchain startups, and international regulatory bodies will help India craft policies that foster innovation while mitigating risks.
Of course, the concerns raised by institutions like the International Monetary Fund (IMF) and the Financial Stability Board (FSB) regarding crypto’s volatility, and systemic risks are valid. But history is replete with examples of revolutionary technologies initially met with scepticism. Consider the early days of the internet, when concerns about security, privacy, and misinformation were rampant. Yet, through regulation and innovation, the internet transformed global communication, commerce, and culture.
The story of crypto is still being written. As we navigate its evolution, we must avoid the trap of reactionary policies driven by fear. The future of finance is unfolding, and India must decide whether to lead or lag behind.
The writer is a technology lawyer
