Don't want to trade it yourself?
Our desk runs DEX portfolios on profit share.
Cryptocurrency regulation is no longer a question of whether digital assets should be regulated. Around the world, the conversation has shifted towards a more practical question: how can regulators protect consumers and financial systems without preventing useful innovation?
For India, this distinction is important. The country has a large technology ecosystem, a digitally sophisticated population and significant interest in blockchain and Web3. At the same time, crypto markets bring genuine risks, including fraud, market manipulation, money laundering, extreme volatility and consumer losses.
The answer is unlikely to be either unrestricted growth or an outright prohibition. India’s opportunity lies in developing a risk-based regulatory framework that provides clarity while maintaining strong safeguards.
Global markets are moving towards clearer rules
The European Union offers one of the most comprehensive examples through its Markets in Crypto-Assets Regulation, or MiCA. The framework establishes rules covering crypto-asset issuance and crypto-asset service providers, with the objective of creating regulatory consistency across member states while supporting innovation. The EU is already reviewing MiCA in 2026, demonstrating that regulation itself must evolve alongside the technology.
The US has also moved towards greater regulatory clarity. In March 2026, the Securities and Exchange Commission issued an interpretation clarifying how federal securities laws apply to certain crypto assets and transactions, alongside guidance from the Commodity Futures Trading Commission.
Dubai provides another relevant example. Its Virtual Assets Regulatory Authority (VARA) operates a dedicated licensing regime covering activities including exchanges, custody, broker-dealer services, lending, investment management and transfer and settlement. VARA also maintains a public register of licensed providers, creating greater transparency for consumers.
These approaches differ considerably, but they share an important principle: regulation is increasingly being built around activities and risks rather than treating every digital asset in exactly the same way.
India already has an important foundation
India has not approached crypto as a regulatory vacuum.
Virtual Digital Asset service providers operating within specified activities are brought under the Prevention of Money Laundering Act framework. FIU-IND requires relevant VDA service providers to register as reporting entities and comply with obligations relating to customer due diligence, record keeping, internal controls, employee training and suspicious transaction reporting.
India has also established a specific tax framework for VDAs. Transfers are currently subject to a 30% tax regime under Section 115BBH, while Section 194S provides for 1% TDS on applicable VDA transfers. The government has also expanded reporting obligations under the Income Tax Act to capture more detailed information on crypto-asset transactions.
This means India already possesses some building blocks for a formal digital-asset framework. The next challenge is connecting those pieces into a clearer, comprehensive market framework.
Regulation should follow the risk
A Bitcoin exchange, a stablecoin issuer, a blockchain infrastructure company, a tokenised securities platform and a decentralised application do not create identical risks. Applying exactly the same regulatory requirements to all of them could discourage legitimate innovation while failing to address the specific risks that matter.
India could therefore consider an activity-based framework covering areas such as:
- Exchanges and brokers: licensing, capital requirements, custody standards, cybersecurity and market surveillance.
- Custodians: segregation and protection of customer assets, proof of reserves and operational controls.
- Stablecoin issuers: reserve requirements, redemption mechanisms and transparency.
- Token issuers: disclosure standards, risk statements and governance requirements.
- DeFi and Web3 infrastructure: proportionate requirements based on the level of control, financial exposure and consumer interaction.
- Advertising and promotion: clear rules against misleading return claims and inappropriate targeting of inexperienced investors.
Such segmentation would allow regulators to focus re
Investor protection should go beyond KYC
KYC and AML compliance are essential, but they represent only one part of investor protection.
A mature framework should also address asset custody, cybersecurity, conflicts of interest, market manipulation, disclosure, complaint resolution and operational resilience. Consumers should be able to determine whether a platform is licensed, what services it is authorised to provide, where customer assets are held and what protections apply if something goes wrong. A public registry, similar to VARA’s model , which identifies licensed entities and the activities they are authorised for, could make this information easier for Indian consumers to verify.
Taxation is another important part of the regulatory equation.
A predictable tax regime can improve compliance, but policymakers must also consider whether the structure encourages activity to migrate to offshore platforms or informal channels. The objective should not simply be maximising immediate tax collection. It should be creating an environment where compliant activity is economically viable and transparent. Better transaction reporting, clearer treatment of different digital-asset activities and efficient compliance mechanisms could help achieve that balance.
Protecting innovation while controlling risk
India should also distinguish between crypto assets as financial products and blockchain as technology infrastructure.
Blockchain applications in supply chains, digital identity, tokenisation, payments and enterprise infrastructure can develop independently of speculative crypto markets. A regulatory framework should therefore avoid creating uncertainty for legitimate blockchain innovation simply because certain digital assets carry financial risks. India could further encourage responsible innovation through regulatory sandboxes, controlled pilots and clearer pathways for blockchain businesses to engage with regulated financial institutions.
The biggest lesson from global regulation is that clarity itself can become a competitive advantage. Europe is building a harmonised framework. Dubai is using licensing and dedicated supervision to attract virtual-asset businesses. The US is moving towards clearer distinctions within its existing financial regulatory structure.
India does not need to replicate any of these models wholesale.
It can build a framework suited to its own financial system, regulatory institutions and technology ecosystem—one that combines strong AML controls with investor protection, transparent licensing, proportionate taxation and room for experimentation. The objective should not be to make crypto risk-free. That is neither realistic nor desirable. The objective should be to make the market more transparent, accountable and predictable, while allowing responsible entrepreneurs to build.
If India gets that balance right, regulation will not necessarily be a constraint on the digital-asset industry. It could become the infrastructure that allows the country’s blockchain and Web3 ecosystem to mature from a largely speculative market into a more credible component of the global digital economy.
Attributes to:Mr. Sathvik Vishwanath, Co-Founder & CEO, Unocoin
Source: newspatrolling.com