India's crypto regulatory moment: Industry hopes new policy paper will pave the way for clarity, not control

India is expected to release the first draft of its cryptocurrency discussion paper as early as this month, a step that could set the tone for how the world's most populous country regulates the fast-evolving world of digital assets. The paper could explore use cases and the benefits of technologies like blockchain, stablecoins, and CBDCs. And across the crypto ecosystem in India, expectations are high.

India's crypto industry, which despite having the world's second-largest Web3 developer ecosystem, remains unregulated, sees the upcoming paper as a crucial step towards its formalisation. Ashish Singhal, Co-founder, CoinSwitch, says it could be "a very good first step" towards forming crypto regulations. "We have seen that different countries are moving at a rapid speed in regulating crypto, and India definitely would not want to be left behind… this is the time to act."

Stakeholders believe it could be a potential turning point, shifting the conversation from uncertainty to clarity regarding crypto regulation in India. "Many of us see this as a defining moment, one that could finally bring much-needed clarity and direction to the crypto asset space," says Sumit Gupta, Co-founder of CoinDCX.

"We hope the paper outlines a practical, forward-looking path to regulation. One that supports experimentation through sandboxes, enables tiered compliance, and creates a licensing framework. It’s time to move from a defensive stance to one of responsible enablement."

Gupta also calls for a clear framework that helps distinguish between different types of crypto assets to explore their real-world use cases.

Stakeholders also think a one-size-fits-all model may not work in India and that there's a need for regulatory clarity, especially around different types of assets. "A one-size-fits-all model may not suffice, given the fundamentally different roles these assets play. Bitcoin is increasingly treated as a digital store of value, stablecoins are crucial for real-time money movement and settlement, and many altcoins, such as Ethereum and Solana, serve as infrastructure for Web3 and decentralised applications," says Edul Patel, Co-founder and CEO of Mudrex.

The demand for nuance extends beyond asset classification to policy being tech-neutral and activity-focused. "India doesn't have to choose between public and private blockchains; both have distinct strengths, and both can thrive together. Public blockchains are powerful because they’re open, transparent, and composable. They’re the foundation for many innovations. At the same time, permissioned blockchains have their place for use cases suited to their strengths. The focus should be on how the technology is used and what safeguards are in place—not on which chain is used," says Gupta of CoinDCX.

Singhal echoes the sentiment, saying private cryptocurrencies can play a larger role in a private setting, but public cryptocurrencies could be very big in creating large organisations, which are not favoured towards one set of users or the other. "Public blockchains would have their future."

He also reiterates the point that India can lead not just domestically but globally if it takes timely action in regulating crypto as an industry. The paper should give the industry a chance to engage meaningfully, he says. "We are hoping our inputs have been considered in the paper already, but the good part of a discussion paper is that we will be given a certain amount of time to respond and provide our comments, and we are waiting for that opportunity."

Singhal says the government's crypto paper could talk about different aspects, not just cryptocurrency and blockchain. "It could be many things like stablecoins, NFTs, trading, altcoins, DeFi."

On the stablecoin front, Patel of Mudrex says regulators are most likely to first focus on fiat-backed stablecoins, especially those backed 1:1 by reserve currencies like the US dollar or Indian Rupee. "These are considered the most transparent and least volatile, with reserves held in regulated financial institutions. Their predictability and clear backing make them the most palatable starting point for regulation." He opines that commodity-backed stablecoins, such as those pegged to gold or other tangible assets, could be considered next, but would require tighter disclosures.

Another expectation is that India sets an example in terms of a regulatory model reflecting its democratic ethos, technological strength, and financial inclusion priorities. This could pave the way for setting global standards, especially for the Global South. "We have to be a rule-maker, not just a rule-taker in emerging digital finance," says Gupta of CoinDCX. 

Amid these expectations, the question remains: will the government signal enablement, engagement, or control?