India’s Crypto & Stablecoin Regulation Overview - October 2025

In October 2025, India’s marquee fintech gathering sent a clear signal: speakers were avoid comments on crypto, even as global markets buzzed. The message: digital finance is welcome, but private crypto and stablecoins remain on the sidelines.

Policy has reinforced that stance. After Budget 2025, the 30% tax on crypto gains still stands, maintaining the Finance Act, 2022 framework. Alongside taxes, virtual digital asset service providers are treated as a PMLA reporting entity—bringing KYC, STR filings and FIU oversight squarely into the picture.

Why does it matter? Because stablecoins touch core questions of monetary sovereignty, capital flows and consumer protection. India’s central bank has consistently flagged the risks of currency substitution and systemic spillovers from privately issued tokens, shaping a “public rails first” posture that favors bank-grade tokenization, supervisory visibility, and prudential safeguards.

That posture also reflects the country’s real economy needs. India is the world’s largest remittance market—an estimated $129 billion in 2024—so the policy preference is to lower costs and speed settlement via UPI linkages, multilateral instant-payment corridors, and CBDC pilots, not dollar-pegged coins. The aim: deliver cross-border efficiency and programmability on sovereign, interoperable rails.

In this overview, we break down India’s October 2025 baseline: the tax-and-AML perimeter around crypto, enforcement signals, the RBI’s stance on stablecoins, the e-rupee’s progress, and how UPI and CBDC pathways are reshaping cross-border payments.

Legal Status in 2025: Unregulated, but AML- and Tax-bound

India’s perimeter is clear in practice: the FIU has issued notices to 25 offshore platforms and sought takedowns for entities serving Indians without complying with domestic rules.

Formally, crypto remains currently unregulated, but transactions fall under the Prevention of Money Laundering Act and the Income-tax Act. In scope, service providers that facilitate exchange, transfer, or custody of virtual digital assets must register as Reporting Entities and implement KYC, record-keeping, and suspicious transaction reporting under FIU-IND oversight.

Tax treatment reinforces that perimeter. Gains from the transfer of virtual digital assets attract a flat 30% tax, while consideration paid in any form for a crypto transfer is subject to 1% TDS at the point of transaction.

For operators, this means “unregulated” does not equal “unmonitored.” AML obligations apply based on activity aimed at Indian users, irrespective of corporate location, and tax withholding/reporting creates a transactional audit trail aligned with India’s broader financial integrity goals.

Net result: India hasn’t created a bespoke crypto law, but it has ring-fenced usage with AML registration plus punitive tax and withholding rules that set the tone for market behavior.

Key Takeaways:

  • India’s posture: no bespoke statute, but crypto activity is governed by AML duties and income-tax rules.
  • VDASPs must obtain FIU-IND reporting-entity status and follow KYC/record-keeping/STR requirements.
  • Flat-tax treatment and transaction-level withholding create a visible, enforceable perimeter for crypto activity.

Compliance and Enforcement: FIU Registration, Travel Rule, and 30% Tax/TDS

India’s enforcement has teeth: the FIU fined Binance ₹188.2 million for AML violations, a clear signal that oversight is active and penalties are material.

On the rulebook side, VDA transfers are explicitly treated as wire transfers, requiring service providers to include accurate originator and beneficiary information (including PAN/National ID), maintain records, and monitor unhosted‑wallet flows as high risk. Crucially, providers offering exchange, transfer, or custody must register with FIU‑IND as reporting entities and align programs with PMLA standards.

Operationally, compliance leaders should formalize FIU registration, implement Travel Rule messaging with the required identity fields, and calibrate risk policies for unhosted‑wallet exposure. Map STR/CTR workflows and sanctions screening to blockchain rails so alerts can be triaged as fast as on traditional payments.

Tax compliance is part of the perimeter. Gains from crypto transfers are subject to a flat 30% tax, and consideration paid for crypto transfers triggers 1% TDS (including in‑kind transactions, where tax must be settled before release). Looking ahead, a new crypto‑asset reporting obligation starts on April 1, 2026, tightening visibility beyond TDS.

Taken together, registration, Travel Rule data, and tax/TDS controls create a unified compliance perimeter that authorities are already enforcing in practice.

Key Takeaways:

  • FIU-IND treats VDA transfers like wire transfers, with mandatory originator/beneficiary data and a strong stance on unhosted-wallet risk.
  • Enforcement is real—platforms face penalties and disruption if they operate without robust AML programs and FIU registration.
  • Tax and withholding are integral to compliance; ensure gains are taxed and transaction-level TDS is applied, with new reporting duties slated for 2026.

Stablecoins vs. Sovereignty: RBI’s Stance and the CBDC-first Roadmap

Standard Chartered estimates USD stablecoins could pull up to $1.22 trillion from EM banks within a few years—exactly the kind of currency substitution risk India’s central bank has been warning about.

The Reserve Bank of India (RBI) frames private tokens as a threat to the monetary order: departures from par compromise the singleness of money, large‑scale use can trigger “cryptoisation,” and foreign‑currency reserves behind stablecoins amplify substitution pressures for EMDEs. In this lens, stablecoins aren’t just payments tech—they are parallel money that can erode policy transmission and capital‑flow management.

Instead of licensing private coins, India is building sovereign rails. The e‑rupee is designed to be interoperable with UPI via the same QR experience, with RBI highlighting offline resilience for “dark zones” and a clear aim to make cross‑border payments more efficient. The roadmap adds targeted controls—benefit disbursements, spend rules, and corporate workflows—through CBDC programmability, while testing multiple offline solutions for nationwide reach.

Execution has followed that blueprint. RBI moved to widen distribution through non‑bank payment operators and reported early traction, citing about 4.6 million retail users as pilots expanded and UPI linkages matured. The direction of travel is clear: build features users already expect from modern wallets, but keep issuance, settlement finality, and monetary control on sovereign rails.

The outcome is a policy bargain: India prioritizes programmable, interoperable public money over private stablecoins, seeking cross‑border efficiency without ceding monetary sovereignty.

Key Takeaways:

  • RBI’s core concern is sovereignty: stablecoins risk “cryptoisation,” currency substitution, and breaks in the singleness of money.
  • India’s alternative is CBDC-first: UPI interoperability, offline capability, and programmability to deliver user utility on public rails.
  • Distribution and usage are scaling through mainstream payment operators, reinforcing a sovereign path to faster domestic and cross‑border payments.

Cross-Border Payments Trajectory: UPI Linkages, Project Nexus, and CBDC Bridges

BIS’s Project Nexus is moving from pilots to plumbing: its first wave could connect 1.7 billion people across linked instant-payment systems.

India’s blueprint follows that arc, with the RBI focusing on interlinking fast payment systems to deliver a less-costly cross-border experience while keeping settlement on sovereign rails. This approach prioritizes standardization and interoperability so users can push small-value payments internationally with the same ease as domestic UPI.

On the ground, UPI corridors are expanding. The Singapore PayNow–UPI linkage was launched to enable cheaper, faster remittances, and UPI has since gone live with partners in Sri Lanka and Mauritius—an expansion India framed as new UPI services for the region. Together with Nexus, these corridors point to a multilateral path that can scale without relying on private stablecoin rails.

Next comes the CBDC bridge track. The RBI and UAE’s central bank agreed to run PoCs and pilots of a bilateral CBDC bridge for remittances and trade, laying the groundwork for sovereign, programmable cross‑border settlement that can complement UPI linkages.

Put together, the UPI–Nexus roadmap and CBDC bridges aim to compress costs and settlement times while preserving monetary control.

Key Takeaways:

  • Project Nexus targets scale: a first wave connecting up to billions of users through instant-payment interoperability.
  • India’s UPI corridors (e.g., Singapore, Sri Lanka, Mauritius) show a practical, public-rail route to cheaper remittances.
  • CBDC bridges with key partners (like the UAE) lay a sovereign path to programmable, cross-border settlement without private stablecoins.

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