The flex of the cryptocurrency market has recently increased with the US declaring its intention to be the global leader in the digital asset. Meanwhile, the Indian crypto market was valued at around $2.5 billion in 2024 and is expected to grow to $15 billion by 2035. An interesting aspect of the growth in India is the spike in trading in semi-urban and rural areas, with youngsters looking to supplement their income. In effect, the spread and acceptance of virtual digital assets in India is becoming broad.
The RBI has remained a crypto-sceptic and has emphasised its potential to disturb macroeconomic stability. The challenge, therefore, is to adopt cryptocurrencies without undermining sovereign economic stability. This requires agile regulation, as innovation and change underline crypto markets.
The global regulatory landscape is evolving, actively seeking inputs from various stakeholders. The regulations range from bespoke legislation to the modification of existing payment and security laws. In India, a formal discussion paper on digital assets is likely to be out soon. The expectation is that regulation must provide certainty and protection for investors. Besides transparency in dealings by crypto exchanges, fraud detection, compliance with tax laws and plugging leakages in the anti-money laundering law are also to be prioritised.
It has been recently reported that certain offshore crypto platforms dodge tax deduction at source, which users could be led to misinterpret as an advantage. However, enforcement action by tax authorities and the proposed OECD-led Crypto Asset Reporting Framework, to which 63 jurisdictions are committed, will ensure that the global tax net is tightened.
Another important aspect is investor education and vigilance against fraudulent transactions. Recently, almost 4.2 million Indian investors faced losses of $230 million attributed to hacking of a crypto exchange. This flags the urgent need for regulatory controls on crypto exchanges and tighter cyber security in general. Many investors do not read the fine print that while crypto exchanges do business in India, there is no established grievance redress mechanism, unlike what exists for breaches by other financial institutions.
A robust listing system based on reliable metrics is required to sift the numerous cryptocurrencies available in the market. This is a developing arena, and well-defined protocols would promote transparency and keep out fly-by-night operators. There is need for oversight on the quality of tokens being offered, so that investors can do due diligence.
To ascertain whether a cryptocurrency is valuable, it is necessary to understand the origins and the narratives of the blockchain on which it is based. Certain currencies have, due to performance metrics and perceptions, moved to a blue-chip category, with bitcoin often being considered ‘digital gold’. This is because bitcoin has been one of the best performing digital assets in the past decade. Even when its prices have crashed, its floor has been rising steadily.
Among India’s neighbours, Bhutan has been at the forefront of crypto mining, using its considerable hydropower. It also holds cryptocurrencies in a strategic reserve in its Gelephu Mindfulness City. According to reports, Bhutan owns $1.1 billion in such reserves. Pakistan has also announced its intention to legalise cryptocurrency to attract foreign investment.
The US has announced the creation of a strategic reserve of cryptocurrencies that includes digital currencies seized by law enforcement agencies. It remains to be seen whether this would prove to be an alternative store of value like gold. However, the volatility inherent in cryptocurrencies would reduce its utility as an inflationary hedge.
In India, cryptocurrency worth about $37 million has been seized by law enforcement agencies due to illegal and criminal activities. The Finance Bill 2025 has amended the definition of undisclosed income to include digital assets. This could translate into more seizures.
A strategic reserve of seized digital assets would counter-intuitively be seen as a positive signal for the cryptocurrency market, as it becomes part of the sovereign kitty. According to IMF’s recently published manual on balance of payments, strategic reserves are to be treated in the same way as cross-border land acquisitions or spectrum licence purchase.
The RBI has introduced a central bank digital coin as an alternative to stablecoins. But with the maturing of the decentralised network, stablecoins have become a force to reckon with. That they are pegged to gold or a fiat currency has seen them surge.
Their global market value rose to nearly $200 billion in early 2025. Many governments that back stablecoins have sought to exercise control through licences given to issuers and have mandated full reserve backing, audits, statutory liquidity requirements and investor protection. Stablecoins also present an opportunity for India to streamline the vast remittance market and foster innovation.
They have the potential to facilitate multinationals bringing in investment to make local payments for products in the local currency. In the long run, it could help India obtain a significant market share on Web 3 platforms. A rupee-backed stablecoin would be a risk mitigation approach to dollarisation, maintaining monetary autonomy and limiting import of external stablecoins tied to foreign currencies. Recent IMF guidelines classify stablecoins as financial instruments. This is in contrast to treating cryptocurrencies as non-produced, non-financial rights.
So the new developments signal that cryptocurrencies can no longer be dismissed as a fringe phenomenon. Financial markets are leveraging blockchain technology by introducing new interest-bearing products. There is an ongoing effort towards tokenisation of financial assets and growing institutional investment in cryptocurrencies. It’s a future that envisages greater integration of cryptocurrencies into the financial system.
Geetha Ravichandran
Former bureaucrat and author, most recently of The Spell of the Rain Tree