KEY TAKEAWAYS
- Crypto futures now account for close to 80% of total crypto trading volume on domestic Indian exchanges, according to industry data.
- Differences in tax treatment, a 1% TDS on spot trades versus none on futures, are the main driver of the shift, industry participants say.
- Internal exchange data cited by Moneycontrol suggests 70-80% of crypto futures participants are currently in losses.
- Some exchanges offer up to 100x leverage on crypto futures, far above SEBI’s 5x cap on regulated equity derivatives.
- Industry estimates suggest close to three-fourths of India’s crypto trading volume happens on offshore platforms like Binance and Bybit.
- The FSDC has reportedly asked RBI and SEBI to examine broader regulation of the sector; VDA service providers already fall under FIU-IND’s anti-money laundering framework.
Crypto futures have become the centre of India’s digital asset market, accounting for close to 80% of trading volumes on domestic exchanges, as traders move away from spot transactions because of differences in tax treatment. The rapid rise of leveraged derivatives trading, however, is also raising concerns over mounting retail losses and the continued absence of a dedicated regulatory framework for crypto in India.
Tax Arbitrage Fuels the Shift to Derivatives
Under the tax framework introduced in Budget 2022, every crypto spot trade attracts a 1% tax deducted at source (TDS), tying up a trader’s capital with each transaction. Crypto futures generally do not involve the same TDS mechanism applicable to transfers of virtual digital assets (VDAs), making them a comparatively cheaper and more attractive route for active traders.
Daily transaction values on domestic exchanges are estimated to have climbed to nearly $5 billion, according to industry data, as volumes migrate toward futures contracts.
Some tax professionals have interpreted certain crypto derivative transactions as speculative business income, where applicable rules may allow losses to be set off against gains — different from the flat 30% tax on VDAs that applies to spot holdings.
This treatment can vary, though, depending on how individual transactions are structured and reported, and traders are advised to seek independent tax guidance rather than assume a particular treatment automatically applies to their trades.
Leverage Far Exceeds Equity Market Norms
Leverage on crypto futures dwarfs what SEBI permits in regulated markets. While equity derivatives are capped at five times leverage, several smaller crypto exchanges allow positions up to 100 times a trader’s capital, since unregulated crypto platforms fall outside SEBI’s leverage limits. Exchange data from Giottus shows an average crypto futures trader places more than 50 trades a month.
Majority of Traders Are Losing Money
Internal data from domestic platforms, shared with Moneycontrol on condition of anonymity, indicates that 70 to 80% of crypto futures participants are currently in losses. Retail investors drive close to 70% of all crypto futures activity in India, meaning individual traders absorb the bulk of these setbacks — a pattern that mirrors retail losses in equity derivatives, which led SEBI to tighten rules in that market. Similar retail losses have also been reported in global crypto derivatives markets.
Offshore Exchanges Capture Most of the Volume
According to industry estimates cited by Moneycontrol, roughly three-fourths of India’s crypto trading activity takes place on foreign platforms such as Binance and Bybit rather than domestic exchanges like CoinDCX and Giottus, largely to sidestep the TDS.
This offshore migration means most trading data never enters India’s official tax records. Ministry of Finance figures placed before the Rajya Sabha in December 2025 showed the declared domestic VDA transaction value at Rs 51,180 crore for FY2024-25, yielding Rs 511.83 crore in TDS — a figure that captures only compliant domestic spot trading and excludes the far larger futures and offshore markets.
Tokenised Assets Add a New Layer
Exchanges argue the volume surge isn’t purely speculative. Tokenised real-world assets (RWAs), digital tokens representing assets such as bonds, real estate, or commodities, are a growing contributor to trading activity.
Prateek Gupta, head of business at Mudrex, said tokenised RWAs make up close to 15% of the platform’s combined volume, a share he expects to reach 20-25% in coming quarters, pointing to global RWA value crossing $25 billion this year.
Regulatory Vacuum Draws Scrutiny
Crypto remains in a regulatory grey zone in India: it is not formally classified as a currency, commodity, or security, and neither SEBI nor the RBI directly regulates crypto trading itself.
Virtual Digital Asset service providers are, however, required to register with the Financial Intelligence Unit-India (FIU-IND) as reporting entities and comply with anti-money laundering obligations under the Prevention of Money Laundering Act, a framework in place since March 2023 and most recently updated in January 2026.
According to sources cited by Moneycontrol, the Financial Stability and Development Council (FSDC), a non-statutory body under the finance ministry, has asked the RBI and SEBI to examine regulating the sector more broadly.
A government official told Moneycontrol that the RBI has been pushing responsibility toward SEBI, but neither regulator wants to take it on, since doing so would mean formally recognising crypto, something the government has been reluctant to do.
Without safeguards, the official warned, a platform collapse could wipe out investor funds entirely, unlike in equities, where protective mechanisms exist.
Legal experts are now calling for a calibrated framework. Moin Ladha, partner at Khaitan & Co, said there is a case for regulating crypto futures given their leveraged nature and the risks facing retail participants.
Unlike equity derivatives, tied to listed companies and established market infrastructure, crypto futures are based on assets that are inherently more volatile, he noted. A well-designed framework, Ladha said, could improve investor protection and market confidence without curbing innovation in the space.
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FAQÂ
Q1. Why are crypto futures more popular than spot trading in India?
Spot trades attract a 1% TDS under India’s VDA tax rules, while crypto futures generally escape this levy, making derivatives cheaper for active traders.
Q2. How much leverage can traders use on Indian crypto exchanges?
Some smaller exchanges allow up to 100x leverage on crypto futures, compared to SEBI’s 5x cap on regulated equity derivatives.
Q3. Is cryptocurrency trading regulated in India?
No single regulator oversees crypto trading itself, it isn’t classified as a currency, commodity, or security, and neither SEBI nor the RBI directly regulates it. VDA service providers must, however, register with FIU-IND and follow anti-money laundering rules under the PMLA, and the FSDC has reportedly asked SEBI and RBI to examine broader regulation.
Q4. What share of Indian crypto trading happens on foreign exchanges?
Industry estimates cited by Moneycontrol suggest around three-fourths of India’s crypto trading volume occurs on foreign platforms such as Binance and Bybit, largely to avoid domestic TDS.
Q5. Is crypto futures trading risky?
Yes. Crypto futures involve leverage, which can amplify both gains and losses. Unlike traditional equity derivatives, crypto futures operate in a market with higher volatility and fewer market-level safeguards.
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DISCLAIMER This article is for informational purposes only and does not constitute investment advice. Cryptocurrency and derivatives trading are subject to high market risk, including the risk of total capital loss. Readers are advised to consult a qualified financial advisor before making any investment decisions. NiftyTrader.in does not take responsibility for any losses incurred based on the information provided.
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