By TBLTeam Crypto in India sits in a strange space. It is not fully banned, but it is also not treated like normal money, shares, mutual funds, or banking products. That is why many people get confused. A person may see crypto exchanges running ads, apps offering Bitcoin and Ethereum trading, influencers talking about Web3, and companies building blockchain products. At the same time, the government and RBI continue to warn about risk.
A crypto business can operate in India, but it must follow strict tax, anti-money laundering, reporting, and compliance rules. However, crypto assets are still not legal tender and India has not yet created a full financial regulatory framework like it has for banks, stocks, insurance, or mutual funds.
Crypto Is Not Legal Tender in India
The most important point is this: cryptocurrency is not legal tender in India. Legal tender means money that must be accepted for payment of debt or settlement. Indian rupee is legal tender. Bitcoin, Ethereum, USDT, Solana, or other crypto assets are not.
The government’s earlier policy position clearly stated that cryptocurrencies are not considered legal tender or coin, and that blockchain technology can be explored separately from private crypto assets.
This means a business should not present crypto as “official money” or “government-approved currency.” A shop, platform, or service provider may deal with crypto assets only within the limits of Indian law, but it cannot market crypto as a replacement for the rupee.
Crypto Business Is Not Completely Illegal
India has not imposed a blanket ban on crypto trading, crypto exchanges, crypto wallets, or crypto asset services. However, in a February 2026 Rajya Sabha answer, the Ministry of Finance stated that Virtual Digital Assets or crypto assets are currently unregulated in India in the broader financial regulatory sense. The same answer also noted that RBI periodically assesses risks from VDAs to domestic financial stability.
This creates a special situation. Crypto business is not banned, but it is not regulated like a normal SEBI, RBI, IRDAI, or PFRDA product. A crypto exchange registered with FIU-IND is not the same as a stock broker licensed by SEBI or a bank licensed by RBI.
So, legality depends on the business model. A blockchain software company, crypto tax tool, analytics platform, wallet service, exchange, custody provider, NFT marketplace, or VDA transfer service may operate, but each category has different compliance duties.
FIU Registration and PMLA Compliance
The biggest compliance requirement for crypto businesses in 2026 is under the Prevention of Money Laundering Act, 2002.
In March 2023, the government brought several VDA-related business activities under the PMLA framework. These include exchange between VDA and fiat currency, exchange between one VDA and another VDA, transfer of VDA, safekeeping or administration of VDA, and financial services related to an issuer’s offer and sale of a VDA.
This means crypto exchanges, wallet providers, custody services, and similar crypto service providers must register as reporting entities with FIU-IND and follow anti-money laundering obligations.
FIU’s guidelines require service providers to follow KYC, customer due diligence, enhanced due diligence, suspicious transaction reporting, record keeping, internal controls, appointment of a principal officer, and risk-based monitoring.
2026 Update: Stronger Compliance Environment
The crypto compliance environment became stricter by 2026. FIU-IND’s downloads page lists updated AML and CFT guidelines for reporting entities providing services related to VDAs, updated on 8 January 2026.
A March 2026 Lok Sabha answer also said that as of 9 March 2026, 54 VDA service providers were registered with FIU-India as reporting entities. It also mentioned that FIU-IND had directed takedown of apps and URLs of 53 VDA service providers found operating illegally in India without complying with PMLA provisions.
This is a major point for business owners. If a crypto platform is operating in India without FIU compliance, it may face blocking, notices, and enforcement action.
FIU Registration Is Not Government Approval
Many people misunderstand FIU registration. If a crypto exchange is registered with FIU, it does not mean the government is endorsing that exchange as safe or risk-free.
The Finance Ministry clarified in March 2026 that FIU-IND has not made the list of registered VDA service providers public because publishing such a list may create the wrong impression that registered entities are licensed, approved, or endorsed by the government.
So, FIU registration mainly means AML and reporting compliance. It does not give investor protection like a regulated bank deposit or SEBI-regulated investment product.
Crypto Tax Rules in India
Crypto tax rules are very strict in India.
The Income Tax Department’s 2026 guidance says VDAs include crypto assets, NFTs, and other digital assets, excluding Indian currency, CBDCs, foreign currency, and certain notified assets. Income from transfer of VDAs is taxed at a flat 30% plus surcharge and cess, with no deduction except cost of acquisition.
The same guidance says 1% TDS applies under Section 194S when payment is made to a resident for transfer of VDA, subject to threshold limits. No TDS is required where the value does not exceed ₹50,000 for specified individuals/HUFs, and ₹10,000 for other payers.
The Finance Ministry also confirmed that losses from VDA transfer cannot be set off against other income and cannot be carried forward.
For a crypto business, this means proper transaction tracking, user reporting, TDS compliance, accounting, and tax filing are not optional. They are core business requirements.
New Reporting Rules from 2026
From 1 April 2026, crypto reporting became tighter. The government inserted Section 285BAA through the Finance Act, 2025 to require specified reporting entities to furnish detailed user-level transaction data to the Income Tax Department. The government said this step is meant to improve visibility into VDA transactions and align crypto reporting with the reporting framework used for banks and other financial intermediaries.
This is important for exchanges, wallet providers, intermediaries, and platforms handling crypto transactions. Crypto business in India is moving towards a data-heavy compliance model.
Can a Business Accept Crypto Payments?
This is risky. Since crypto is not legal tender in India, businesses should avoid presenting crypto as an official payment substitute for INR. If a business accepts crypto in any commercial arrangement, it must still handle taxation, accounting, GST/service implications where applicable, FEMA concerns in cross-border cases, and VDA reporting issues.
For most Indian businesses, accepting normal rupee payments is safer. Crypto payments may create valuation, tax, refund, volatility, and compliance problems.
FAQs
Q1. Can I start a crypto exchange in India in 2026?
A: Yes, but only with proper compliance. A crypto exchange dealing with VDA transfers, fiat-to-crypto conversion, crypto-to-crypto exchange, or custody services must follow PMLA rules and register with FIU-IND as a reporting entity. It must also handle KYC, suspicious transaction reporting, TDS, tax reporting, and user-level transaction records.
Q2. Is crypto trading legal for individuals in India?
A: Crypto trading is not banned for individuals, but it is heavily taxed. Profits from VDA transfer are taxed at 30% plus applicable surcharge and cess. In many cases, 1% TDS also applies on VDA transfers. Losses from crypto cannot be freely adjusted like normal business or capital market losses.
Q3. Is crypto mining legal in India?
A: India has not created a separate clear licensing system for crypto mining. Mining is not directly treated the same as running an exchange or custody platform, but income from mined crypto, sale of mined assets, electricity use, business accounting, and tax reporting can create compliance issues. Mining businesses should take professional tax and legal advice before scaling.
Q4. Is an FIU-registered crypto exchange fully safe?
A: No. FIU registration does not mean the exchange is government-approved like a bank or SEBI-regulated broker. It mainly means the entity is registered for AML and reporting obligations. Users still carry market risk, hacking risk, platform risk, liquidity risk, and regulatory risk.
Q5. Can Indian businesses promote crypto investment schemes?
A: They must be very careful. Any crypto ad should not promise guaranteed returns, fixed income, government backing, or risk-free profit. Misleading investment claims can attract consumer protection, advertising, tax, and enforcement trouble. Crypto is a high-risk asset class, and business promotions must clearly avoid false assurance.