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Budget 2026 Puts Spotlight on Crypto as Industry Seeks Tax Relief and Regulatory Clarity
As preparations for Budget 2026 gather pace, India’s cryptocurrency industry is intensifying calls for clearer regulations and a more balanced tax framework. Market participants argue that current policies, particularly the 1% tax deducted at source (TDS) on crypto transactions, have constrained liquidity and driven trading activity offshore. Industry stakeholders are urging the government to rationalise taxes while maintaining oversight, contending that a predictable policy environment could unlock innovation, boost compliance, and strengthen India’s position in the global digital asset economy. The debate highlights the challenge of aligning revenue objectives with sector growth.
Industry Push for Policy Clarity
India’s crypto ecosystem has matured rapidly, but regulatory ambiguity continues to weigh on growth. Industry leaders are calling for well-defined rules that clearly distinguish between different digital assets, trading activities, and use cases. They argue that clarity would encourage responsible innovation and reduce uncertainty for investors and entrepreneurs.
A transparent framework is also seen as essential for attracting institutional capital and long-term investments.
The 1% TDS Debate
At the centre of the discussion is the 1% TDS levied on crypto transactions. While introduced to improve traceability, the tax has significantly reduced trading volumes on domestic platforms. Exchanges note that frequent deductions erode capital efficiency, particularly for active traders and market makers.
The industry is advocating a lower or alternative mechanism that preserves transaction visibility without impairing market liquidity.
Tax Structure and Global Competitiveness
Beyond TDS, stakeholders are seeking a more nuanced tax regime that aligns with global practices. High effective tax rates, combined with compliance complexity, risk pushing innovation and capital to more accommodating jurisdictions.
A rationalised tax structure, they argue, could expand the tax base over time by encouraging onshore participation rather than suppressing activity.
Government Balancing Act
For policymakers, Budget 2026 presents a delicate balancing act. Authorities must safeguard financial stability and prevent misuse while fostering a nascent but strategically important sector. Recent moves to integrate crypto platforms into existing compliance frameworks suggest a preference for regulation over prohibition.
Any tax adjustments will likely be evaluated against revenue considerations and enforcement effectiveness.
Implications for Investors and Startups
Clearer rules and tax relief could provide much-needed certainty for investors and startups alike. Reduced friction may improve liquidity, enhance price discovery, and support the development of ancillary services such as custody, compliance technology, and blockchain infrastructure.
The broader digital economy stands to benefit from a more supportive policy stance.
Conclusion
The crypto industry’s expectations from Budget 2026 underscore its desire to operate within a stable and predictable regulatory environment. Rationalising the 1% TDS and offering clearer guidelines could mark a turning point, enabling India to balance oversight with innovation. How the government responds will shape the sector’s trajectory and its role in the country’s evolving financial landscape.
Inside India’s Crypto KYC Framework: How Exchanges Screen Users in a Regulated Digital Market
As India tightens oversight of digital assets, Know Your Customer (KYC) compliance has become central to how crypto exchanges operate. Platforms are now required to follow stringent identity verification and anti-money laundering norms, reshaping the user onboarding process. From document verification to transaction monitoring, exchanges are deploying layered checks to align with regulatory expectations while preserving user trust. The evolving KYC regime reflects the government’s intent to curb illicit activity without stifling innovation. For investors and businesses, the shift signals a maturing crypto ecosystem that is increasingly integrated with the formal financial system.
Regulatory Push Reshapes Crypto Onboarding
India’s crypto ecosystem has entered a more regulated phase, with KYC norms emerging as a foundational requirement. Exchanges are expected to verify user identities before allowing trading, deposits, or withdrawals. This move aligns digital asset platforms with standards already applicable to banks and financial institutions.
The objective is clear: enhance transparency, deter misuse, and bring crypto activity under formal financial oversight.
How Exchanges Verify User Identity
Crypto exchanges typically begin KYC by collecting government-issued identification, such as Aadhaar, PAN, or passport details. This is followed by address verification and, in many cases, biometric or video-based authentication. Advanced platforms use automated systems to cross-check documents against official databases, reducing the risk of fraud.
The process is designed to balance speed with accuracy, ensuring genuine users are onboarded efficiently.
Ongoing Monitoring and Risk Assessment
KYC does not end at onboarding. Exchanges continuously monitor transactions to identify unusual patterns or high-risk behavior. Large transfers, rapid movement of funds, or links to flagged wallets often trigger enhanced due diligence.
This ongoing surveillance helps platforms comply with anti-money laundering requirements and report suspicious activity to relevant authorities when necessary.
Data Security and User Privacy Concerns
With greater data collection comes heightened responsibility. Exchanges are under pressure to safeguard sensitive personal information through encryption, secure storage, and restricted access. Any lapse could undermine user confidence and invite regulatory scrutiny.
Industry players increasingly view robust data protection as a competitive advantage, not merely a compliance obligation.
Impact on Users and Market Participation
For users, stricter KYC has introduced additional steps before trading, occasionally slowing onboarding. However, many market participants acknowledge that stronger compliance improves platform credibility and reduces systemic risk.
Institutional investors, in particular, prefer regulated environments, suggesting that rigorous KYC could expand the market’s long-term depth.
India’s Broader Crypto Policy Direction
The emphasis on KYC reflects India’s broader approach to digital assets—regulate rather than prohibit. By integrating crypto exchanges into the existing financial compliance framework, authorities aim to maintain oversight while allowing innovation to continue.
This strategy positions India to adapt as global crypto regulations evolve.
Conclusion
Crypto KYC in India has moved from a formality to a central pillar of the digital asset ecosystem. As exchanges strengthen identity checks and transaction monitoring, the market is becoming more transparent and institutionally credible. While compliance adds friction in the short term, it lays the groundwork for sustainable growth, investor confidence, and deeper integration with India’s financial system.
GainBitcoin Probe Takes Dramatic Turn as Auditor Arrested Over Rs 30 Crore Crypto Asset Diversion
The long-running GainBitcoin cryptocurrency fraud investigation has taken a startling turn with the arrest of a forensic audit firm official accused of siphoning off digital assets seized during the probe. Mumbai Police allege that the accused acted in collusion with certain law enforcement personnel to divert cryptocurrency worth nearly Rs 30 crore. The case, which dates back to 2018, centres on an alleged investment scam that promised unusually high returns through bitcoin-linked schemes. The development has raised serious questions about oversight, custodial safeguards, and integrity within complex financial crime investigations involving digital assets.
Arrest Sparks Fresh Controversy in GainBitcoin Case
Mumbai Police’s Economic Offences Wing has arrested Gaurav Harish Mehta, 31, an official associated with a forensic audit firm appointed to assist Pune Police and Cyber Police in the GainBitcoin fraud investigation. Authorities allege Mehta misappropriated cryptocurrency assets that had been seized as part of the ongoing probe.
Investigators are now pursuing other suspects, including additional audit firm officials and certain police personnel whose names have surfaced during inquiries spanning Mumbai and Pune.
Background of the Cryptocurrency Fraud
The GainBitcoin case was registered in 2018 at the Nigdi and Dattawadi police stations in Pune. The investigation invokes multiple provisions of the Indian Penal Code, the Maharashtra Protection of Interest of Depositors (MPID) Act, and the Information Technology Act.
According to investigators, the alleged scam involved enticing investors with promises of exceptionally high returns through cryptocurrency-based investment plans, a tactic that exploited both market enthusiasm and limited regulatory clarity at the time.
Allegations of Collusion and Asset Diversion
Police claim that the accused siphoned off seized digital assets valued at nearly Rs 30 crore. The alleged diversion underscores the complexities of handling cryptocurrencies during criminal investigations, where custody, access controls, and technical expertise play a critical role.
Officials say the inquiry is now focused on tracing asset movements and determining the extent of internal collusion.
Defense Challenges Arrest
Mehta’s legal counsel, Aftab Qureshi, has denied the allegations, arguing before the court that his client was falsely implicated. The defense contended that Mehta was summoned to assist investigators and was treated as a witness before being arrested without justification, calling him a scapegoat in a wider controversy.
Court Orders Police Custody
The 47th Metropolitan Magistrate Court remanded Mehta to police custody, allowing investigators additional time to question him and pursue leads related to missing digital assets.
Broader Implications for Crypto Crime Investigations
The arrest has highlighted vulnerabilities in the handling of digital evidence and seized cryptocurrencies. As financial crimes increasingly involve virtual assets, the case underscores the need for tighter protocols, independent oversight, and transparent audit mechanisms to preserve public trust in high-stakes economic investigations.
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