A Critical Analysis Of The Impact Of Cryptocurrency Regulation On Financial Innovation And Digital Asset Governance In India
Rahul K R, LLM,Amity Law School, Amity University, Bengaluru
Dr. Jyotirmoy Banerjee, Assistant Professor, Amity Law School, Amity University, Bengaluru
ABSTRACT
India's policy regarding cryptocurrencies is at a pivotal point, balancing prudent monetary management and the pressing demand for a definitive and prospective policy structure. In India, which is consistently one of the top 5 nations in the world as per the cryptocurrency adoption index, the legal framework is still reactive instead of proactive, despite the growing digital asset economy. The government acknowledges the existence of the virtual digital asset sector but takes only a tentative step towards its potential, with a thirty per cent flat tax on its income and a one per cent tax deducted at source on transactions under the Finance Act, 2022. Meanwhile, the Reserve Bank of India has conducted its own trial of a Central Bank Digital Currency, adding to the regulatory complexity. This paper critically examines how the existing and proposed regulatory measures affect financial innovation and digital asset governance in India. It draws on comparative examples from Singapore, the European Union, the United Kingdom, Germany, and some emerging economies, and concludes that the combination of disjointed regulation, ongoing legislative uncertainty and absence of proper regulation of digital assets are all contributing to the stifling of fintech innovation, the attraction of capital from the formal sector, and a lack of meaningful investor protection. The paper also argues that to make the most of the significant opportunities offered by the blockchain economy while ensuring systemic stability, India must have a risk-based, technology-neutral and coordinated regulatory approach that elevates digital asset governance as a separate stream of financial regulation.
Keywords: Cryptocurrency Regulation, Digital Asset Governance, Financial Innovation, Virtual Digital Assets, Blockchain, India, CBDC, MiCA.
