Trends in India’s Crypto Market: Why Futures Outpace Spot Trading

Over the past few years, India’s crypto market has seen notable shifts. The latest figures indicate that futures trading now comprises more than three times the share of spot trading within the country’s trading landscape. This development is no accident. First, the leverage provided by futures appeals to investors seeking greater returns with less capital. Second, India’s stringent tax policies mean that every spot transaction incurs significant taxes, while futures enjoy a more favorable tax treatment, making derivatives markets more attractive to investors.

The increased liquidity in the futures market has further fueled this trend. As more participants enter the space, the market benefits from a virtuous cycle, with improved price discovery and efficiency. This dynamic allows Indian investors to uncover fresh opportunities in local markets even as global crypto markets fluctuate.

Tax Enforcement Tightens: Leveraging AI and Big Data

India’s government has recently ramped up its approach to crypto taxation. By deploying AI and big data analytics, tax authorities can monitor trading behaviors with greater precision and better detect potential tax evasion. In the past, much of India’s crypto market operated in a regulatory “gray area,” with many transactions escaping formal oversight. That era is coming to an end.

Recent data reveals that tax authorities have collected hundreds of millions of rupees in crypto-related taxes. For everyday investors, these developments mark the gradual close of the crypto market’s “free period”—compliance costs are now unavoidable. Importantly, this approach not only boosts government revenue but also improves market transparency. Over time, this could lead to greater industry standardization and increased trust.

Investor Perspectives: Tax Reform and Evolving Compliance

Even as regulatory pressure increases, market stakeholders are speaking out, pushing for a more balanced taxation framework. Currently, India imposes a 1% tax deducted at source (TDS) on all crypto trades and does not permit loss offsets. This has placed a heavy burden on many investors, especially those trading frequently with small amounts.

In response, investors and industry bodies are calling on the government to ease some of these requirements—for example, by lowering the TDS rate or permitting the deduction of losses. Lately, relevant government agencies have initiated discussions with industry representatives, raising hopes for regulatory improvements. If the tax load is reduced in the future, it could further stimulate market activity.

Conclusion

India’s crypto market is navigating both tightening regulatory frameworks and heightened trading enthusiasm. The concurrent rise of futures and stricter tax enforcement are reshaping the landscape. Whether future tax reforms can strike a workable balance will be key to the market’s long-term development. For new participants, understanding these shifts is essential for proper preparation and risk management before investing.