Few contrasts illuminate the philosophical divide in global cryptocurrency regulation more sharply than the divergent approaches adopted by India and the United Kingdom. While the UK charts a deliberate course toward innovation-friendly oversight, India remains trapped between bureaucratic caution and market reality. This posture is increasingly untenable for a nation that hosts one of the world’s most engaged crypto user bases.
The UK’s Forward Architecture
The Financial Conduct Authority (FCA) has articulated a pragmatic, sophisticated vision. The UK regulatory framework acknowledges crypto assets and stablecoins are mainstream: over 90% of UK residents have heard of crypto, and roughly seven million own digital assets. Its philosophy is clear: create a trusted, competitive, and innovative market while maintaining proportionate consumer protections.
The UK’s approach demonstrates intellectual maturity: regulators recognize that “lift and shift” of traditional finance rules creates regulatory friction without meaningful consumer protection. Instead, it introduces bespoke solutions: operational resilience frameworks for crypto firms (mirroring banking standards), stablecoin-specific sandboxes for real-world testing, and a clear 2025-2026 implementation roadmap. The FCA solicits industry feedback through consultations on custody, prudential requirements, and compliance standards, rather than imposing dictates.
Critically, the UK recognizes stablecoins as infrastructure assets capable of enhancing growth and competitiveness. This translates into specific guardrails: issuer eligibility, backing requirements, redemption guarantees, and interoperability standards, rather than blanket prohibition.
India’s Regulatory Paralysis
By contrast, India’s position reflects regulatory ambivalence bordering on incoherence. The Reserve Bank of India’s (RBI) recurring characterization of cryptocurrencies as a huge risk exemplifies this hesitation. The RBI Governor’s preference for government-backed digital innovations while maintaining a very cautious approach toward private digital assets reveals a core contradiction: the RBI conflates prudential concerns about unregulated systems with a fundamental rejection of regulated alternatives.
This stance is particularly troubling given India’s robust crypto market fundamentals. Cumulative trading volumes reached $300 billion from July 2024 to June 2025, and the market is projected to grow to $15 billion by 2035. India’s regulatory vacuum is not suppressing market participation; it merely ensures that participation occurs without safeguards.
The Gap: Crypto Derivatives and Accountability
The most revealing critique of India’s regulatory negligence comes from within the financial services industry, notably from the founder of Zerodha. He highlighted the dangerous regulatory blind spot concerning crypto derivatives. These products exist in a Schrödinger’s cat condition, being neither fully regulated nor unregulated, which allows offshore platforms to accept Indian users while remaining jurisdictionally unreachable.
The structural hazards are systemic: offshore derivative platforms routinely offer leverage ratios of 100-200x, meaning minor price movements can trigger complete liquidation. Counterparties are often the platforms themselves, creating perverse incentive structures where platforms profit when users lose. Crucially, no accountability mechanisms exist: there is no regulatory grievance redressal, ombudsman, or legal recourse when platforms collapse. India’s formal regulatory framework does not even acknowledge derivatives as requiring separate oversight. This omission reflects a broader regulatory philosophy: if markets operate offshore and remain invisible, they require no governance. This logic is strategically naïve and ethically indefensible for the nation’s retail participants.
The Real Test: Consumer Protection Infrastructure
India’s government has announced a comprehensive Virtual Digital Asset (VDA) framework review, signaling movement. This review encompasses licensing, consumer protection, stablecoin oversight, taxation, and market monitoring. Proposed protections include mandatory fund segregation, transparent reserve disclosures, defined liability structures, and formal grievance-redressal mechanisms. These proposals mirror the proportionate approach seen in the UK and global best practices.
However, these protections remain merely proposals. Implementation is clouded by the RBI’s continued skepticism, which is rooted in financial stability concerns rather than evidence-based risk assessment. A government working group has been tasked with determining if at all, crypto is to be handled in India, framing the question in terms of prohibition rather than regulation, reflecting a deeper conceptual failure of mistaking caution for prudence.
Institutional Credibility and Market Integrity
The UK’s strategy creates conditions that attract institutional participation, generating an additional dividend. Enhanced regulatory standards typically lead to improved liquidity, more sophisticated investment products, and reduced manipulation, which strengthens market integrity. Conversely, India’s regulatory void invites the opposite: wash trading, counterparty fraud, and mismanagement flourish where oversight is absent.
The Financial Stability Board (FSB) emphasizes the principle of “same risk, same regulation” across jurisdictions. By treating regulated crypto platforms differently from traditional financial institutions, India violates this fundamental principle while simultaneously failing to prevent the actual harms (fraud, leverage abuse, counterparty collapse) that its cautious rhetoric purports to address.
The Path Forward
For India’s clients, investors, and stakeholders, the contrast is stark. The UK offers a clear roadmap built on clarity and proportionality. India offers ambiguity, working groups, and the persistent threat that regulatory frameworks might classify activity as prohibited rather than regulated.
India must urgently seize the opportunity provided by its current comprehensive review. Crypto derivatives require mandatory domestic licensing, leverage restrictions, transparent order books, and independent oversight. Stablecoins require backing requirements and interoperability standards. Exchanges need segregated custody and minimum capital standards. These are not radical measures; they are the baseline expectations applied in the UK, Singapore, and EU jurisdictions that are deliberately positioning themselves as competitive, trusted, and innovative. India must decide whether it wishes to lead or follow; the current path leads neither to security nor to innovation, resulting only in continued regulatory theater while citizens bear unprotected risks.
Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard.
