What It Is Like to Use Crypto in India
I have traded crypto in India since the early WazirX years. The strange part is not that crypto is banned; it is not. The strange part is that every practical signal tells a user to stay away.
You can buy, hold and sell a virtual digital asset. You can also face a 30% tax on income from the transfer, no set-off of losses under the VDA rules and 1% TDS on the consideration paid when the transaction crosses the relevant threshold.
That combination makes active trading difficult for reasons that have little to do with market skill.
Tax rules change. The figures here reflect the Income Tax Department’s VDA guidance as amended by the Finance Act, 2026. This is a personal account, not tax advice.
The tax changes the market
The 30% rate gets most of the attention. For an active trader, the 1% TDS can be more disruptive because it affects working capital throughout the year.
TDS is not the final tax bill; it can be claimed in the return. But money deducted today is money that cannot be used for the next trade. High-turnover strategies feel that drag repeatedly, even when the net return is modest.
The loss rule is harder to defend from a trading perspective. Markets produce gains and losses as part of the same activity. Taxing winning transfers while refusing to recognise VDA losses for set-off makes the tax base look very different from the trader’s economic result.
I understand the government’s desire for a visible transaction trail. I do not understand why that trail needs to remove so much liquidity from a market participant before the final liability is calculated.
Banking is where uncertainty becomes personal
The tax is at least written down. Banking friction is less predictable.
I have had transactions flagged and accounts reviewed after legitimate peer-to-peer activity. The difficult part was not providing information. It was not knowing what standard I was being assessed against or how long access would be restricted.
That uncertainty changes behaviour. People avoid ordinary bank transfers, move activity to platforms outside India or give up on a transaction because the operational risk is larger than the financial opportunity.
A clear rule can be planned around. A rule that appears only after an account is frozen cannot.
Exchanges did not earn enough trust
Indian exchanges made access easier, but convenience is not custody.
The WazirX breach was a reminder that an account balance on an exchange is a claim on an operator, not the same thing as holding the keys yourself. Since then, more of my own thinking has moved toward self-custody and toward understanding exactly what happens between signing a transaction and seeing it settle.
That experience is one reason I began building Anvil Wallet. Complaining about poor custody is easy. Building an alternative forces you to deal with key storage, chain-specific signing, recovery and the many ways users can lose money without an attacker being involved.
Self-custody is not automatically safer for everyone. It replaces platform risk with personal responsibility. It should at least be a practical option.
The policy question
The Reserve Bank of India’s concerns are not imaginary. Capital flight, consumer losses, fraud and financial stability deserve serious controls. Crypto has produced enough failures to make a purely hands-off approach irresponsible.
The problem is that deterrence is not a complete regulatory framework.
A useful framework would answer ordinary questions clearly:
- Which platforms may serve Indian users?
- What reserves, audits and segregation of customer assets are required?
- What must a bank do before restricting an account?
- How should gains and losses from the same activity be treated?
- What can a builder test without first moving the company abroad?
Users do not need the government to endorse crypto. They need to know where the boundaries are.
Where I land
I do not expect crypto to be treated like a special, risk-free industry. I want it treated as a real one.
Tax the gains. Require records. Make exchanges prove custody. Prosecute fraud. Give banks a clear process and give users a clear path to appeal.
The current system is precise about collection and vague about participation. That is why using crypto in India can feel legal on paper and suspect in practice.