Indian Parliamentary Panel Proposes Interim Crypto Regulation

India's Parliamentary Standing Committee on Finance has recommended establishing an interim regulatory mechanism for virtual digital assets (VDAs) through a recognized self-regulatory organization (SRO) operating under a designated regulator. These recommendations, linked to the proposed Securities Markets Code, 2025, have reignited hopes within the crypto industry that policy discussions will move beyond taxation and AML compliance towards regulating the market itself.

The recommendations do not alter the current regulatory framework but represent a formal acknowledgement that the sector continues to operate in a regulatory grey area. "It's an important signal, though not yet a shift in policy. It's a shift in official acknowledgement," stated Edul Patel, founder and CEO of Mudrex. Patel noted that the committee has, for the first time in a parliamentary document, recognized that excluding VDAs from India's securities framework has created a regulatory gap.

Currently, India taxes VDA income at 30%, levies a 1% TDS on specified VDA transfers, and requires crypto exchanges to register with the Financial Intelligence Unit-India (FIU-IND). However, a comprehensive law governing the sector is yet to be enacted. SB Seker, head of APAC at Binance, believes the recommendations indicate policymakers are looking beyond compliance measures towards a more comprehensive framework for digital assets.

Industry stakeholders emphasize that digital assets like cryptocurrencies, stablecoins, and tokenized securities should not be regulated as a single class due to their distinct economic functions. Patel suggests a classification where tokenized securities would fall under SEBI's jurisdiction, payment-oriented assets under the RBI, and crypto-native assets under a dedicated VDA framework supported by the SRO. This could also facilitate the tokenization of traditional assets, though issues of ownership, custody, and investor protection still need addressing.

The committee's proposal for an SRO has received broad support from the industry, though it is often seen as a bridge rather than a permanent solution. However, industry stakeholders stress that licensing, enforcement, and policymaking should ultimately remain with the government, with the SRO playing a more operational and supervisory role.