1.  How is crypto regulated?
  2. What are the steps taken by the regulator to adopt MiCAR? 
  3.  Are the following activities regulated or unregulated in your jurisdiction? ― Direct sales of tokens by issuers ― Exchange (buy/sell) ― Custody (hold) ― Borrowing/lending ― Yield/staking ― Staking on proof of stake consensus mechanisms (please indicate if NFTs are treated differently from fungible crypto assets for each activity)
  4. Can offshore business provide services to local customers on either active solicitation or reverse solicitation basis?
  5. How long would establishing a crypto asset business/ obtaining a licence in your jurisdiction take?
  6. What would be the approximate overall cost of obtaining a licence?
  7. What is the probability (%) of success in obtaining a licence?
  8. What other limitations are there in your jurisdiction when looking to set up a crypto asset business? E.g., Compliance requirements and physical presence.

jurisdiction

India

Disclaimer: This chapter was last updated on 14 July 2025 and does not reflect any subsequent developments. The information provided is intended for general informational purposes and should not be construed as legal advice.

1. How is crypto regulated?

AML RegulationFinancial Services Regulation

Pursuant to a notification issued by the Ministry of Finance in 7 March 2023, entities conducting certain activities for or on behalf of another legal or natural person and in the course of business were included within the scope of ‘reporting entities’ who are subject to oversight under the Prevention of Money Laundering Act, 2002 (PMLA) and the relevant rules, and these activities are: a) exchange between virtual digital assets* (“VDA”) and fiat currencies; (b) exchange between one or more forms of VDAs; (c) transfer of VDAs; (d) safekeeping or administration of VDAs or instruments enabling control over VDAs; and (e) participation in and provision of financial services related to an issuer’s offer and sale of VDAs (individually and collectively, “VDA Activities”).

Reporting entities are subject to certain reporting and record keeping requirements (including KYC requirements of customers prior to onboarding) under the PMLA read with the rules, along with being subject to registration with the Financial Intelligence Unit – India (FIU-IND), which is the regulator having oversight over this space.

*VDA has been defined under Section 2(47A) of the Income Tax Act, 1961, which has been summarised in the adjacent column.

The Income Tax Act, 1961 (“Income Tax Act”) was amended by the Ministry of Finance through the Finance Act, 2022. A new Section 2(47A) was introduced to define VDA which includes any information or code or number or token, providing a digital representation of value, and includes a non-fungible token or any other token of a similar nature.

The Income Tax Act prescribes certain specific taxes in relation to undertaking transactions in VDA. The return filed under the Income Tax Act also requires that all VDA transactions are appropriately declared in the said return. It is also mandatory to declare foreign VDA transactions if undertaken by a person tax resident in India.

Separately, the Advertising Standards Council of India (“ASCI”) a voluntary self-regulatory organisation also prescribes certain guidelines for advertisements relating to VDA – however, while industry players generally follow ASCI’s guidelines in this regard, there aren’t any penal consequences that the ASCI can take for non-compliance.

Lastly, certain sector-agnostic regulations would generally apply and extend to VDA transactions as well, which includes exchange control laws for cross-border transactions involving VDA, consumer protection laws etc.

2. What are the steps taken by the regulator to adopt MiCAR? 

N/A

3. Are the following activities regulated or unregulated in your jurisdiction? ― Direct sales of tokens by issuers ― Exchange (buy/sell) ― Custody (hold) ― Borrowing/lending ― Yield/staking ― Staking on proof of stake consensus mechanisms (please indicate if NFTs are treated differently from fungible crypto assets for each activity)

AML RegulationFinancial Services Regulation

Direct sales of tokens by issuers

o   No, undertaking direct sales of tokens (i.e., VDA) by issuers is not a VDA Activity undertaken for or on behalf of another entity or person in the course of business, and would not trigger applicability of obligations for a ‘reporting entity’ set out under the PMLA and the rules.

Exchange (buy/sell)

o   Yes, operating an exchange where VDA can be bought and sold is a VDA Activity [specifically points (a), (b) and (c) in our response to Query 1] and accordingly will trigger applicability of the obligations for ‘reporting entities’ set out under the PMLA and the rules.

Custody (hold)

o   Yes, enabling custody of VDA is a VDA Activity [specifically point (d) in our response to Query 1] and accordingly will trigger applicability of obligations for ‘reporting entities’ set out under the PMLA and the rules.

Borrowing/lending

o   Yes, enabling borrowing/lending of VDA may fall within the scope of VDA Activities [specifically in the context of facilitating exchange of VDAs/transfer of VDAs, as set out in points (a), (b) and (c) in our response to Query 1].

Yield/staking services

o   Yes, providing yield/staking services of VDA may fall within the scope of VDA Activity [specifically in the context of facilitating administration and enabling control over VDA, as set out in point (d) in our response to Query 1].

Staking on proof-of-stake consensus mechanisms

o   Same as above.

As mentioned above, the definition of VDA includes within its scope non-fungible tokens (“NFT”). However, it is to be noted that VDA does not include an NFT whose transfer results in transfer of ownership of underlying tangible asset and the transfer of ownership of such underlying tangle asset is legally enforceable.

For tax purposes, each of these activities would trigger the abovementioned compliances under the Income Tax Act.

4. Can offshore business provide services to local customers on either active solicitation or reverse solicitation basis?

AML RegulationFinancial Services Regulation
Yes, offshore business can provide services (falling within the scope of VDA Activities) to local customers in India either on active solicitation or reverse solicitation basis, subject to registration requirements under the PMLA and the rules as set out in Query 1. There are no specific regulations that are specifically triggered, if these activities are conducted on an active/reverse solicitation basis. N/A

5. How long would establishing a crypto asset business/ obtaining a licence in your jurisdiction take?

AML RegulationFinancial Services Regulation
Setting up an entity in India and operationalising the bank account can generally take up to two - three weeks under the (Indian) Companies Act, 2013. Post incorporation, there is no specific timeline for completion of registration with the FIU-Ind, and it is usually at the discretion of and dependent on the company’s interactions with the regulator. The registration process generally involves: (i) a physical meeting with the FIU-Ind (where certain documents such as charter documents, and tax filings, preferably over a period of 3 years are required to be furnished); (ii) conferring of an in-principle approval if the documents furnished satisfy the FIU-Ind, (iii) online registration on the FIINET Portal 2.0 post receipt of in-principle approval, and; (iv) conferment of final registration.N/A

6. What would be the approximate overall cost of obtaining a licence?

AML RegulationFinancial Services Regulation
While there may be some cost in setting up of an entity in India/registration as a foreign company (payable to the registrar of companies), there is no fee that is payable to the FIU-Ind for registration.N/A

7. What is the probability (%) of success in obtaining a licence?

AML RegulationFinancial Services Regulation
In case all regulatory requirements (company incorporation, KYC/AML systems, tax registrations, designation of principal officer and designated director along with the completeness and accuracy of documentation) are satisfied, the probability of successfully obtaining the FIU-IND registration is very high.N/A

8. What other limitations are there in your jurisdiction when looking to set up a crypto asset business? E.g., Compliance requirements and physical presence.

AML RegulationFinancial Services Regulation
Broad compliance requirements under the PMLA and the rules involve registration, record keeping and periodic reporting requirements to the FIU-Ind. Registration requirements are triggered prior to commencement of business, while record keeping and reporting are ongoing compliances that a reporting entity must comply with.

Under the Indian goods and services tax laws, if any commission or brokerage or service fee are charged from an unregistered user in India, it could trigger compliance and tax liability for an offshore entity providing services in India.

Under the (Indian) Companies Act, 2013, companies in India are required to confirm and disclose in their annual profit and loss statements, details of their investments in VDA along with details regarding any deposits or advances from any person for the purpose of trading/investing in VDAs.

Further, INR is not a freely convertible currency and any transaction involving a capital asset (one that alters rights or liabilities) is subject to approval barring a few permitted instances. A cross-border fiat-crypto transaction can fall under this category leading to some regulatory complications.