TL;DR >> This piece argues that India’s problem is not “crypto” but a category error: policymakers are conflating very different digital assets and, in the process, missing Bitcoin’s emerging role as a strategic, neutral reserve-like asset. It shows that India has already taxed and AML-wrapped virtual digital assets and that Indian savers lead the world in grassroots crypto adoption, yet there is still no institutional, onshore way for high-value investors to hold Bitcoin in a regulated manner.
Drawing on RBI’s accelerated gold repatriation and India’s vast household and temple gold holdings, it frames private balance sheets as a quiet pillar of macro resilience and makes the case that Bitcoin can play an analogous “digital gold” role if channelled through a conservative, SEBI-regulated, spot-only Bitcoin AIF (optionally piloted in GIFT City). The article is a practitioner’s proposal for a narrow, Bitcoin-only AIF as a first, credible step that aligns with existing tax, FEMA and PMLA frameworks while reducing FX leakage and giving regulators full visibility into an asset that is already firmly inside the global reserve conversation.
The article was originally published by Fortune India on Jan 15th, 2026.
Call it branding error or historical accident, but the label “cryptocurrency” has trapped India’s debate. It has led many policymakers to see everything in this space as a parallel money system that competes with the rupee. In reality, different digital assets do very different things.
India does not need a new currency. It already has one of the world's most efficient payment and settlement stacks in UPI, RTGS, IMPS and now the e-Rupee. What India lacks is a clear, regulated pathway to a new kind of asset – most importantly, Bitcoin.
The distinction matters.
- Stablecoins behave like digital dollars and raise a separate set of questions around capital controls and dollarisation.
- A long tail of “crypto tokens” are essentially high-risk technology or venture-style bets.
- There are also foundational protocol tokens like Ethereum that power smart contract platforms and applications – but those belong more naturally in innovation and venture-style portfolios than in a reserve framework.
- Bitcoin, by contrast, has evolved into a neutral, globally traded, digitally native store of value with a hard supply cap of 21 million.
Treating all three as the same thing is no longer tenable in policy.
Bitcoin is also not competing with India's own digital rupee initiative. The e-Rupee pilots are about payment efficiency, settlement and inclusion – a digital form of the rupee inside the existing monetary framework. Bitcoin plays a different role: it sits closer to digital gold than to digital cash.
Bitcoin has already become a strategic asset globally
Digital assets as a whole are now roughly a multi-trillion-dollar asset class. Bitcoin alone accounts for a very large share of that – around USD 1.7 trillion of market value – with deep, round-the-clock liquidity.
Since early 2024, the United States, Canada, Germany, Brazil, Australia and several European jurisdictions have approved spot Bitcoin ETFs or physically backed ETPs. Together, these regulated products now hold on the order of well over a million BTC on behalf of investors, a material share of the total circulating supply.
Across Europe, regulated crypto ETPs listed on exchanges such as SIX Swiss Exchange and Deutsche Börse Xetra now represent close to USD 20 billion in assets, with Bitcoin and Ethereum accounting for the majority of AUM and a growing share held via institutional mandates and fund-of-fund structures.
Governments and public entities have also moved. Various state actors now hold several hundred thousand BTC between them, representing an estimated 2-3% of total supply. In the Gulf, Abu Dhabi has gone a step further by backing large-scale, Bitcoin mining directly through a joint venture.
This is no longer a retail or fringe phenomenon. It is institutional and increasingly sovereign.
India has already recognised crypto – without giving it a framework
India has not been passive. It has:
- Defined “Virtual Digital Assets” (VDAs) in the Income Tax Act and taxed gains from them at 30 percent since 2022, with a 1 percent TDS on most transactions.
- Brought VDA service providers – exchanges, custodial wallets and related intermediaries – under the Prevention of Money Laundering Act, requiring FIU-IND registration, KYC, AML and suspicious transaction reporting.
In late 2024, the Supreme Court pointed at the core tension: if the state is comfortable taxing crypto at 30 percent, it should also provide a “clear cut” regulatory position, rather than leaving the sector in limbo.
At the same time, India ranks at or near the top of global indices for grassroots crypto adoption, even with this tax and regulatory overhang. Chainalysis’ 2023 Global Crypto Adoption Index placed India first worldwide.
So Indian investors are already in the asset class. The state already taxes it and monitors it under PMLA. What is still missing is a domestic, institutional-grade path for high-value investors to hold the one asset in this universe that clearly qualifies as a strategic store of value: Bitcoin.
A reserve mindset: from gold and dollars to digital scarcity
The Reserve Bank of India has been quietly re-architecting the country's balance sheet. Over the last two years, the RBI has accelerated the repatriation of gold from foreign vaults. By mid-2025, total official gold reserves stood at around 880 tonnes, with roughly 60–65 percent of that now held in domestic vaults – the highest share in decades.
This accelerated repatriation gathered pace after G7 countries froze roughly USD 300 billion of Russia’s central bank reserves in response to the Ukraine invasion, prompting central banks everywhere to reassess what “risk-free” and “liquid” really mean for sovereign assets.
Having worked on both physical supply chains and now purely digital ones, I read this shift as India consciously recognising that where and in what form it holds value is no longer a technical detail but a strategic choice.
India is already adjusting to a world where reserves can be politicised. Increasing the share of gold held at home is one response. Developing a measured Bitcoin strategy is the logical complement:
- Bitcoin has no issuer and no foreign central bank.
- It trades globally, 24x7, in deep and transparent markets.
- Its monetary policy – supply and issuance schedule – is fixed and auditable in code.
Private ownership as sovereign strength: For a country where households and temples are estimated to hold on the order of 25,000–30,000 tonnes of gold – roughly 12–15 percent of global above-ground stocks and worth several trillion dollars at current prices – private ownership of a scarce asset is already a quiet pillar of macro resilience. Over USD 700 billion of foreign-exchange reserves sit alongside this in official hands.
Even a low single-digit share of indirect Bitcoin exposure, built up over time through domestic investors and regulated structures, would start to play a similar role – private balance sheets reinforcing national robustness, just as they already do with gold.
Why start with a Bitcoin AIF
Given this context, the most conservative and credible way for India to engage with Bitcoin is not through retail trading on offshore exchanges, but through a tightly regulated Alternative Investment Fund structure.
A Bitcoin-focused AIF, regulated by SEBI, would:
Target only sophisticated investors
Participation is limited to investors who already meet AIF thresholds (currently INR 1 crore minimum commitment, with limited exceptions). This keeps the structure away from mass retail and concentrates it on investors who are already operating with professional advice.Use INR as the primary on-ramp
Subscriptions come in via INR through the banking system. The fund converts into Bitcoin under a disclosed, SEBI-reviewed mandate and manages any related FX exposure under FEMA rules. FX management becomes visible and governable, unlike offshore routes.Keep custody onshore and supervised
All Bitcoin is held with institutional custodians using cold storage, with infrastructure located in India or in tightly supervised partner jurisdictions. Investors do not receive raw keys in the initial phase; they hold units in the fund. This removes unmanaged peer-to-peer movement and creates a single, auditable point of oversight.Stay simple on risk: spot only, no leverage
The initial framework can be extremely conservative: fully paid spot Bitcoin only, no leverage, no lending or rehypothecation, no derivatives. This mirrors the cleanest ETF structures globally, but implemented under India’s AIF regime rather than copying foreign models wholesale.Bring flows under AML, CFT and FIU-IND visibility
Every investor is fully KYCed. The fund, its manager and its intermediaries are reporting entities under PMLA, with obligations to file Suspicious Transaction Reports and maintain robust monitoring. Instead of Indian capital moving into opaque offshore products via the Liberalised Remittance Scheme, Bitcoin exposure is routed through a domestic, reportable, auditable channel.Reduce forex leakage and create the option for inflows
Today, many high net worth Indians who want Bitcoin exposure use LRS or foreign brokerages, creating a steady FX outflow. A domestic Bitcoin AIF keeps that flow – and its management and custody fees – inside India. Over time, such a structure could also be opened, in a controlled way, to foreign investors allocating into an India-domiciled product.India does not need to build all of this from scratch. SEBI already regulates custodians and alternative funds. FIU-IND already supervises VDA intermediaries. Indian exchanges and custodians already operate secure cold storage and KYC/AML systems. This proposal leans on existing infrastructure rather than asking for a new regulatory edifice.
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Pilot through GIFT City before scaling domestically
This structure could also be piloted through GIFT City's existing Fund Management Regulations as a restricted scheme for eligible investors, allowing regulators to gather operational and risk data in a ring-fenced environment before scaling the same model into the broader domestic AIF regime.
Why Bitcoin, and not “crypto” in general
The scope here is intentionally narrow.
Bitcoin’s case rests on three specific properties:
- It is the oldest and most proven digital asset, with more than sixteen years of secure operation and no protocol-level failure.
- It has achieved a distinct role as a store of value and collateral asset, held via regulated products and increasingly by public actors, not just by retail traders.
- It is not a utility token, governance token or application platform. It is closer to gold and reserves than to equity or venture risk.
Other major digital assets may deserve their own frameworks in future – for example, Ethereum or protocol tokens within innovation funds or tokenised securities under capital markets regulation. But they raise different questions and belong in different buckets.
Starting with a Bitcoin-only AIF keeps the policy move focused, explainable and defensible.
From confusion to strategy
India has already built some of the most respected digital financial rails in the world – from UPI to a deep, electronic capital market. It has recognised digital assets in tax law and AML law. Its citizens are already among the most active participants in crypto globally.
What is missing is not intent or capacity. It is a clear, conservative, institutionally acceptable path for Indian capital to hold the one digital asset that is now firmly inside the global reserve conversation.
A carefully designed Bitcoin AIF is the right place to start – and it signals that India intends to participate in shaping the next layer of global finance, not just reacting to it. My own view, after working across both traditional consumer markets and on-chain finance, is that this is one of the few steps India can take that is simultaneously conservative, credible and future-proof.