India Faces Risk of Losing Its Crypto Economy Without Clear VDA Regulation

A member of India’s upper house of parliament has suggested a new approach to taxing and regulating cryptocurrency.
According to the minister, the approach currently used on virtual digital assets is contradictory, because cryptocurrencies are taxed as legitimate financial instruments while they are also regulated as if they are unlawful.
Raghav Chadha highlighted that virtual digital assets (VDAs), including cryptocurrencies and stablecoins, are currently being subjected to a 30% capital gains tax, and 1% of the tax is deducted at the source.

Despite this, he noted that the sector lacks formal legal recognition, a system that protects investment, and a dedicated anti-money-laundering framework. This loophole creates uncertainty for investors, startups, and even regulators.

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According to Chadha, this regulatory imbalance has not reduced crypto activities within the country but has instead driven them offshore. He stated that nearly 12 crore Indians now invest through overseas digital assets platforms, while an estimated ₹4.8 lakh crore in VDA trading volume has moved out of the domestic digital assets market.

Source: Raghav Chadha (X)

He also added that 73% of India’s total crypto trading volume takes place on foreign exchanges. In addition to that, he said approximately 180 Indian crypto startups have shifted their base abroad due to the absence of a clear and supportive regulatory environment in India.

Push for Legal Recognition and Compliance of Crypto Assets

Chadha suggested that the solution for this lies in the official’s ability to create a more compliant environment for digital assets to thrive rather than completely prohibiting it.

He requested that VDAs operating in the country should be given a clearer operating standard supported by a domestic regulatory body and strong AML regulations to ensure transparency and investor protection.
He added that bringing crypto activities back onshore would help improve regulatory oversight and compliance while also strengthening tax collections. According to his estimates, a clear and well-defined framework could generate between ₹15,000 crore and ₹20,000 crore in annual tax revenue.
Concluding his remarks, Chadha urged policymakers not to fear innovation but to regulate it responsibly. To him, prohibition does not offer protection, but instead a well-organized regulation is the most effective way to safeguard investors and the broader financial system.

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