Cryptocurrency in India: The Quest for Regulation and Stability
India's journey into the world of cryptocurrencies has been marked by a unique blend of cautious optimism and legal uncertainty. As one of the fastest-growing digital economy, with an overwhelming interest in cryptocurrency among its populace, it is crucial to understand who regulates this burgeoning industry within the vast Indian framework.
As early as 2018, India's central bank, the Reserve Bank of India (RBI), declared that all virtual currencies - including Bitcoin and Ethereum - were banned in the country. This decree was aimed at preventing banks from dealing with digital currency exchanges, effectively freezing the cryptocurrency market in India for a brief period. However, this regulatory stance has not been permanent, as Indian authorities have come to realize the potential benefits of these technologies, especially in terms of innovation, financial inclusion, and economic diversification.
Since then, there have been significant shifts in how cryptocurrencies are viewed and regulated within the country. The Securities and Exchange Board of India (SEBI) has been identified as a key player in shaping this regulatory landscape, given its mandate to oversee and regulate all matters related to securities market activities. While SEBI does not directly control cryptocurrency trading, it acts as an essential watchdog over exchanges operating within the nation, making sure they adhere to stringent norms and regulations.
The role of the Internal Security Council (ISC) is also noteworthy in this context. The ISC, which advises the Home Ministry on issues related to internal security, has been involved in drafting policies around cryptocurrency regulation. In 2019, it submitted a report to the government advocating for a cautious approach towards cryptocurrencies, recommending the need for a comprehensive legal framework and regulatory oversight.
In July 2025, the Indian government announced its first-ever regulatory framework for cryptocurrencies - the Cryptocurrency regulation in India: A new regime through the adoption of the Money Laundering Control Act, 2018 (MiCAR), which includes provisions to regulate digital currencies. This move signifies a significant step towards creating clarity on who is responsible for regulating these assets within the country and what activities are permitted or prohibited.
The regulatory framework aims at distinguishing between cryptocurrencies as legally permissible digital assets, their regulation through tax and compliance mechanisms, and their strict prohibition of usage in illegal activities. The RBI has been given a central role to supervise financial institutions and ensure they do not deal with cryptocurrency transactions. Meanwhile, SEBI's responsibility remains overseeing the trading platforms and exchanges that facilitate these transactions.
Under this regulatory framework, both digital asset issuers and wallets are required to comply with Know Your Customer (KYC) norms. The Indian government has also announced its intention to levy a 1% tax on cryptocurrency transactions as part of its effort to legalize the trade in cryptocurrencies while discouraging money laundering and other illegal activities that can be facilitated by these digital assets.
Despite these regulations, there remains some uncertainty regarding specific details such as how strict KYC norms will be enforced or what penalties may apply for non-compliance. The Indian government continues to refine its regulatory approach to better balance the interests of the cryptocurrency industry and protect consumers from potential scams and frauds while facilitating innovation in financial services.
In conclusion, understanding who regulates cryptocurrency in India is essential for grasping how this burgeoning sector will evolve within the country's regulatory framework. The combination of SEBI, RBI, and the Internal Security Council presents a multifaceted approach that seeks to strike a balance between embracing innovation while ensuring consumer protection and preventing illegal activities. As regulation continues to develop, it is likely that cryptocurrency in India will become an increasingly stable and regulated part of the financial ecosystem.