‘India Taxes Crypto as Legal — So Why Regulate It Like It’s Illegal?’ Lawmaker Demands Clarity

Prashant Jha

Fri, February 13, 2026 at 3:01 PM GMT+9 6 min read

Key Takeaways

Raghav Chadha urged the legalization of virtual digital assets (VDAs) in Parliament.

He warned that regulatory ambiguity is driving billions of dollars in trading volume and startups offshore, and called for stronger AML safeguards alongside a domestic framework.

His remarks have reignited debate over whether India is ready for structured crypto regulation.

India taxes crypto like it’s legitimate — and regulates it like it’s contraband.

That contradiction took center stage in Parliament this week, when Aam Aadmi Party MP Raghav Chadha used the Union Budget debate to press the government on what he called a policy limbo that is pushing billions of dollars in trading activity and hundreds of startups out of the country.

Speaking in the Rajya Sabha, Chadha argued that India cannot keep collecting revenue from virtual digital assets (VDAs) while refusing to give them legal clarity, investor safeguards, or a structured compliance framework.

His message was direct: if the government won’t ban crypto, it should regulate it properly — before the industry permanently builds itself elsewhere.

The intervention has reignited a long-simmering question in New Delhi: is India finally ready to move from ambiguity to a defined crypto regime, or will caution continue to trump reform?

Chadha Calls Out India’s Crypto Policy Contradictions

In his speech, Chadha cited data to illustrate what he sees as the economic cost of ambiguity.

He claimed that roughly 73% of India’s crypto trading volume has shifted to foreign exchanges, resulting in an estimated ₹4.8 lakh crore ($55 billion) in offshore trade.

He also stated that approximately 180 Indian crypto startups have relocated abroad in search of regulatory clarity.

This migration, he argued, deprives India not only of technological innovation but also of potential tax revenues.

With proper onshore regulation, Chadha estimated that the government could generate ₹15,000–20,000 crore annually ($1.65 billion – $2.20 billion).

“India taxes VDAs like they are legal. But regulates them like they are illegal,” he said.

Currently, crypto assets in India face a 30% capital gains tax and a 1% Tax Deducted at Source (TDS).

However, they lack formal legal recognition, dedicated investor protection mechanisms, and a clearly defined regulatory structure specific to digital assets.

Chadha called for VDAs to be treated as a distinct asset class under a structured regulatory regime.

He advocated for strong anti-money laundering (AML) safeguards, enhanced compliance standards, and the creation of a domestic regulatory sandbox to encourage innovation while managing risks.

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“Prohibition is not protection; regulation is protection,” he concluded. “Let us not fear innovation—let us regulate it.”

His remarks have revived debate across political and financial circles over whether India is approaching a turning point in crypto policy.

Indian Politicians and the Crypto Divide

Chadha’s position is not occurring in isolation.

Over the past several years, Indian lawmakers have expressed sharply differing views on cryptocurrency regulation.

In 2022, Nationalist Congress Party (NCP) MP Supriya Sule called for a complete ban on cryptocurrencies during parliamentary discussions.

She questioned the logic of imposing a 30% tax on gains if the assets were deemed inherently risky or undesirable.

Commerce and Industry Minister Piyush Goyal has also expressed reservations.

In 2025, he reiterated that the government is “not encouraging cryptocurrencies,” citing concerns related to fiscal stability and misuse.

Former Finance Secretary Subhash Chandra Garg, who chaired the 2019 inter-ministerial committee that drafted a proposed crypto ban bill, has consistently warned that cryptocurrencies could facilitate hawala transactions, money laundering, and tax evasion.

He has argued that large sums of wealth are being transferred abroad without sufficient oversight.

Measured Support and Regulatory Push

On the other side, some figures show tacit support through personal involvement.

Union Minister Jayant Chaudhary disclosed personal crypto holdings worth over ₹21 lakh ($24,000) in 2025, marking the second consecutive year in which a cabinet member reported digital asset ownership.

Minister of State for External Affairs Meenakshi Lekhi previously advocated blocking cryptocurrencies only when used for illegal purposes.

Electronics and IT Minister Ashwini Vaishnaw has clarified that while crypto as a currency is “a clear no,” other blockchain-related applications may warrant discussion.

These contrasting positions underscore the absence of political consensus.

Opposition often centers on systemic risk and financial stability concerns, while proponents argue that regulation—not prohibition—is the more pragmatic path.

Evolution of India’s Crypto Regulatory Landscape

India’s crypto policy journey has been marked by caution, reversals, judicial intervention, and incremental regulatory steps.

It has now evolved to a more structured, albeit incomplete, framework.

Early Warnings and Regulatory Pushback

The Reserve Bank of India (RBI) first issued warnings about cryptocurrencies in 2013, citing volatility, consumer protection gaps, and money laundering risks.

As crypto adoption increased, an inter-ministerial committee was formed in 2017 under Subhash Chandra Garg to examine cryptocurrencies.

A major turning point came in 2018 when the RBI issued a circular prohibiting banks from providing services to crypto-related entities.

The move effectively disrupted the industry and pushed several businesses offshore.

Judicial Intervention and Legislative Uncertainty

In 2020, the Supreme Court overturned the RBI’s circular in the case of Internet and Mobile Association of India v. RBI, ruling the ban disproportionate.

The judgment revived crypto activity in India but did not resolve regulatory uncertainty.

Subsequent legislative proposals—including the 2019 draft “Banning of Cryptocurrency & Regulation of Official Digital Currency Bill” and its 2021 iteration—sought to criminalize private cryptocurrencies while exploring the introduction of a central bank digital currency (CBDC).

However, Parliament did not enact either bill.

Taxation Without Full Recognition

In 2022, the government introduced a flat 30% tax on crypto profits and a 1% TDS on transactions.

While this move acknowledged the sector’s existence for taxation purposes, it stopped short of granting formal legal recognition.

Regulatory progress accelerated in 2023 when the Financial Intelligence Unit (FIU) required VDA service providers to register as “reporting entities” under the Prevention of Money Laundering Act (PMLA).

This imposed AML obligations and aligned India more closely with global compliance standards.

Compliance and Enforcement Measures

During India’s G20 presidency, Finance Minister Nirmala Sitharaman emphasized the need for international coordination on crypto risk management.

By 2025, additional developments included:

An 18% GST on exchange services.

The Madras High Court’s recognition of cryptocurrency as “property” in a WazirX-related case.

The FIU blocking 25 offshore platforms for non-compliance.

The Road Ahead for India’s Crypto Industry

Despite these measures, India has yet to introduce a comprehensive digital asset framework covering licensing, investor protection, and market oversight.

Public sentiment appears to favor reform. Surveys indicate that 93% of investors support regulation, while 84% consider the 30% tax regime excessive.

A Turning Point or Political Rhetoric?

India has consistently ranked high on global crypto adoption indices, reflecting strong retail participation despite regulatory headwinds.

Chadha’s call for structured legalization arrives at a moment when India’s digital asset ecosystem is expanding, yet remains constrained by policy ambiguity.

Whether his remarks signal genuine legislative momentum or remain part of a broader political debate remains uncertain.

What is clear is that India’s approach has shifted from outright prohibition to partial oversight.

The next phase will likely hinge on balancing innovation, financial stability, consumer protection, and anti-money laundering safeguards.

As adoption continues to grow, the pressure to move from ambiguity to clarity may intensify.

If policymakers coalesce around a defined framework, India could transition from regulatory uncertainty to structured oversight—transforming what some view as “noise” into durable policy progress.

The post ‘India Taxes Crypto as Legal — So Why Regulate It Like It’s Illegal?’ Lawmaker Demands Clarity appeared first on ccn.com.

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