Budget 2026: Regulatory Framework For Crypto Exchanges On Cards?

Enforcement agencies have highlighted risks related to money laundering and terror financing, prompting closer scrutiny of crypto platforms operating in India.

The ministry of finance (FinMin) is in discussions with the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) ahead of the Union Budget 2026-27 to firm up a regulatory framework for crypto exchanges, official sources said.

As part of the early discussions in the ministry, Sebi is likely to emerge as the primary regulator for crypto exchanges, while the RBI may oversee aspects related to foreign direct investment (FDI), cross-border transactions and capital flows, an official close to the development said.

"Under the proposed framework, all Indian crypto exchanges are expected to register with Sebi for tighter supervision of trading platforms, disclosures and investor protection norms," the official said.

Need For Single Market Regulator

At present, oversight of crypto assets in India is spread across agencies.

While tax authorities handle the taxation of virtual digital assets (VDAs), bodies such as the Financial Intelligence Unit (FIU-IND) monitor anti-money laundering compliance, and enforcement agencies probe violations linked to illicit flows.

Policymakers have long viewed the lack of a single market regulator as a key gap in the existing regime.

According to sources, multiple government agencies have flagged serious enforcement and monitoring challenges under the current framework.

Officials point out that the anonymous and borderless nature of crypto transactions, particularly those routed through offshore exchanges, private wallets and decentralised platforms, has made tracking difficult.

"Despite crypto being taxed, the absence of a market regulator makes it difficult for authorities to trace the full flow of transactions and assess the correct tax liability," another official added.

Lack of regulated crypto eco system

According to officials, the absence of a comprehensive regulatory framework has also constrained India's ability to operationalise international commitments such as the Organisation for Economic Co-operation and Development's (OECD) Crypto-Asset Reporting Framework (CARF).

While India has endorsed the framework in principle, the lack of a regulated crypto ecosystem makes it difficult to systematically collect and exchange standardised transaction-level data with partner jurisdictions, they said.

Separately, enforcement agencies have highlighted risks related to money laundering and terror financing, prompting closer scrutiny of crypto platforms operating in India.

According to Amit Rana, partner at PwC, regulation is a step in the right direction.

"For the government, it is an opportunity to define the box, prescribe clear asks for the players, and provide a framework to collect data and information. For the players, it gives much-needed certainty and clarity. And for investors and users, it enables them to invest with confidence. It's a win-win for all stakeholders," Rana said.

While India has introduced several tax-reporting mechanisms for crypto transactions, experts argue these measures are no substitute for market regulation.

Taxpayers Should Disclose Crypto Transfers

According to Sanjay Sanghvi, partner at Khaitan & Co, taxpayers are required to disclose crypto transfers under Schedule VDA in income-tax (I-T) returns, while a 1 per cent tax deducted at source (TDS) applies to transactions, with compliance largely undertaken by exchanges.

In addition, a new provision, Section 285BAA of the I-T Act, mandates banks and crypto intermediaries to report transaction-level information to the tax department.

"However, these tools largely enable post-facto detection and do not address issues such as market conduct, investor protection and real-time oversight," Sanghvi said.

"However, these tools largely aid post-facto detection and do not address issues such as market conduct, investor protection and real-time oversight," Sanghvi said.

Globally, governments are moving to put clearer safeguards around crypto markets.

The European Union has rolled out a unified Markets in Crypto-Assets framework, while the United States regulates crypto through a mix of federal and state agencies, with recent legislation focusing on stablecoins.

These developments form part of the broader backdrop to India's ongoing deliberations.

Feature Presentation: Aslam Hunani/Rediff