Cryptocurrency Regulation in India: Legal Uncertainty, Financial Stability, and Digital Sovereignty

Crypto Assets, Regulatory, Fiscal, Money laundering, Digital

The rapid global expansion of decentralized cryptoassets has confronted state authorities with complex regulatory, fiscal, and structural challenges.[1] In India, this tension is uniquely pronounced. The state has chosen to navigate private digital innovations by asserting its authority across multiple domains: maintaining structural barriers, implementing rigorous taxation frameworks, and advancing state-controlled alternatives. This research paper evaluates the three-dimensional matrix shaping India's cryptocurrency policy ecosystem: macro-legal uncertainty, systemic risks to financial stability, and the pursuit of digital sovereignty.By analyzing judicial shifts—such as the landmark Internet and Mobile Association of India (IAMAI) v. Reserve Bank of India case—alongside contemporary anti-money laundering amendments under the Prevention of Money Laundering Act (PMLA), the strict fiscal regimes established via the Finance Acts, and the parallel rollout of the Digital Rupee (e₹) as a Central Bank Digital Currency (CBDC), this paper demonstrates how India has constructed a de facto containment strategy. It concludes that while this approach has successfully mitigated systemic exposure and curbed capital flight, the persistent lack of an integrated statutory framework leaves retail investors exposed, keeps the domestic web3 ecosystem in legal limbo, and highlights the ongoing friction between private cryptographic protocols and sovereign monetary controls.