Crypto Industry Urges Greater Regulatory Clarity at BFSI Insight Summit

India’s Crypto Debate Turns to Tax Design and Trust

Industry leaders say clearer rules could help narrow the gap between investor demand and the way digital assets are taxed and regulated.

Tax certainty has not resolved trading frictions

The panel’s central concern was that knowing how digital assets are taxed does not necessarily mean the framework works smoothly for every type of investor. Vandana Ahuja, partner at EY India, said taxation had become clearer, but the 1 per cent tax deducted at source remained a concern, particularly for frequent traders. Because the deduction applies to transactions, she said, it can be disproportionate to a trader’s eventual profit.

That distinction matters: a transaction-based deduction can affect funds available to trade even when the final gain is uncertain. Ahuja said the industry needed to raise its concerns with the government. She also noted that tax authorities were receiving more transaction information through data-sharing arrangements and exchanges of information with other countries. The debate, therefore, is not only about rates, but also how reporting and tax rules fit the way digital assets change hands.

Trading activity may shift when costs rise

Vikaas Sachdeva, CEO of BitDelta India, argued that adoption extends beyond major cities, with activity coming from tier-II, tier-III and tier-IV towns. He cautioned against treating adoption figures alone as proof that domestic platforms are capturing the activity. Sachdeva said the introduction of the 1 per cent TDS coincided with an 81 per cent drop in business for leading exchanges, adding that trading had shifted overseas rather than stopped.

That is an industry participant’s account, not a measure of the entire market. Still, it highlights a policy trade-off: rules intended to improve tax visibility may also influence where users transact. If activity migrates beyond domestic platforms, the reach of local safeguards and reporting requirements could become a concern. The panel’s call for a more suitable framework reflects that tension, though it did not set out a specific alternative tax proposal.

Policy discussion trails a fast-changing market

S B Seker, Binance’s head of Asia-Pacific, said the regulatory discussion had changed little despite India’s substantial user base. His remarks point to a gap between market demand and policy development, while also recognising concerns around fraud prevention and transparency. Seker said exchanges were building tools to support regulators in addressing those issues.

For policymakers, the challenge raised at the summit is to weigh investor safeguards and oversight against the risk that unclear or difficult-to-comply-with rules push activity elsewhere. For platforms, regulatory clarity could make it easier to explain obligations to users and plan products, but the discussion offered no indication of when or how policy might change.

Tokenisation broadens the conversation beyond trading

The panel also looked beyond crypto trading to tokenisation: using blockchain technology to represent assets digitally. CoinSwitch cofounder Vimal Sagar Tiwari described it as an important use case, with the potential to make real-world assets programmable, while noting that practical applications still need to arrive. Sachdeva said trading was only one part of an increasingly layered sector.

The opportunity remains prospective rather than established. Tiwari also stressed the need for education and argued that customer protection should not come at the expense of innovation. Whether tokenisation develops into useful financial products will depend not just on technology, but on clear rules, trust and effective safeguards.

Key Highlights

• Industry representatives called for clearer regulation and a tax framework suited to digital-asset activity.
• EY India’s Vandana Ahuja said the 1 per cent TDS can weigh particularly on frequent traders.
• BitDelta India’s Vikaas Sachdeva said leading exchanges saw an 81 per cent business drop after TDS was introduced, with activity moving overseas.
• Panellists said investor demand is advancing while the regulatory discussion remains unresolved.
• Tokenisation was discussed as a potential blockchain use case, but practical real-world applications have yet to arrive.

Investor Note: The summit’s discussion signals unresolved questions, not a confirmed policy change. Investors should distinguish industry proposals from government action and weigh the regulatory and protection risks alongside any potential in digital assets.