Indian Parliamentary Panel Proposes Crypto Regulation Framework

India's Parliamentary Standing Committee on Finance has proposed a new direction for regulating virtual digital assets (VDAs), suggesting the establishment of a self-regulatory organization (SRO) operating under a designated regulator. This move aims to address a regulatory gap, as India's approach to cryptocurrencies has largely been confined to taxation.

The committee acknowledged the regulatory grey area created by excluding VDAs from existing securities laws. While current policies include a 30% tax on crypto gains and transaction reporting requirements, a dedicated framework for the ecosystem remains absent, causing uncertainty for startups and investors.

Industry stakeholders have responded positively, viewing the recommendations as a significant step beyond punitive taxation towards clearer rules and investor protection. The proposals are also seen as an attempt to differentiate various classes of digital assets.

However, questions persist regarding the practical implementation. Industry leaders argue that VDAs are too diverse for a single regulatory approach, suggesting separate oversight for tokenized securities (under SEBI), payment-related assets (under RBI), and crypto-native assets. It remains uncertain whether these recommendations will translate into actionable law.

In parallel, Indian startups experienced a notable drop in weekly funding. Last week, cumulative funding across the startup ecosystem reached $209 million from 14 deals, a decrease from the previous week's $281 million across 24 deals. The manufacturing sector secured the most funding at $52 million, followed by the SaaS sector with $50 million.