India's crypto legalization debate has reignited. On February 9, 2026, Aam Aadmi Party (AAP) MP Raghav Chadha addressed the Rajya Sabha (upper house), calling for cryptocurrencies and virtual digital assets (VDAs) to be recognized as a formal asset class. He highlighted a stark contradiction: crypto investors pay a 30% tax on profits and a 1% TDS on every transaction, yet the country lacks clear laws, licensing systems, or anti-money laundering (AML) frameworks.
Capital Flight and a Tokenization Bill
Chadha pointed out that policy uncertainty has already driven more than 4.8 trillion rupees worth of digital asset trading to overseas platforms, costing the economy capital, tax revenue, data, and innovation. Drawing a parallel to India's UPI revolution, he argued that blockchain and tokenization could democratize access to high-value assets. He revived his December 2025 proposal for a “Tokenization Bill,” which would split assets such as real estate, infrastructure projects (highways, solar plants), commodities, and intellectual property into small digital units. This would allow middle-class investors to buy small stakes, improve liquidity, reduce paperwork, and generate income through rent or revenue sharing under strict legal safeguards.
Bipartisan Support Meets Regulatory Resistance
Chadha is not alone. A former finance minister (unnamed) publicly urged stablecoin regulation and a strategic Bitcoin reserve in mid-2025. Finance Minister Nirmala Sitharaman acknowledged global shifts and said India remains open to a consensus on regulation rather than bans. Prime Minister Modi, while critical of “unbacked cryptos,” recognized blockchain's potential. Industry leaders continue to push for fair taxation, banking access, and regulatory sandboxes. India is estimated to have 120 million crypto investors, one of the largest user bases globally, making the status quo increasingly untenable.
Yet major hurdles remain. The Union Budget for 2026-2027 left crypto rules unchanged: 30% tax, 1% TDS, no loss set-off or carry-forward, no licensing or legalization framework. Instead, it introduced stricter penalties for reporting failures. The Reserve Bank of India (RBI) continues to warn against private cryptocurrencies, citing money laundering and financial stability risks, while promoting its CBDC, the e-Rupee.
Full Legalization Unlikely in Near Term
Raghav Chadha's push has added momentum, and the sheer number of domestic investors makes reform harder to ignore. However, strong resistance from regulators and the unchanged tax regime suggest that full legalization remains a policy debate, not imminent law. The path forward is prolonged negotiation rather than immediate breakthrough.