Crypto industry welcomes parliamentary panel’s VDA regulation proposal

The Parliamentary Standing Committee on Finance’s recommendation to introduce an interim regulatory framework for virtual digital assets (VDAs) through self-regulatory organisations (SROs) has received strong backing from India’s cryptocurrency industry, with experts describing it as a pragmatic step toward ending years of regulatory uncertainty.

In its 36th report on the proposed Securities Markets Code, 2025, presented on July 23, the panel recommended that recognised SROs operate under the supervision of a designated regulator until a comprehensive law governing digital assets is enacted. The committee also advised against automatically classifying cryptocurrencies as securities, arguing that the diverse nature of digital assets requires a more nuanced legal framework.

The panel suggested creating clearer legal classifications for VDAs, acknowledging that different types of crypto assets could resemble securities, derivatives, or other financial instruments. It also recommended clarifying the regulatory treatment of crypto investment products and tokenized securities, while including enabling provisions in the proposed code to accommodate emerging tokenized financial products.

The recommendations, however, do not alter India’s existing tax regime for digital assets. The 30% tax on gains from VDA transactions and the 1% tax deducted at source (TDS) on transfers will continue to remain in force.

Industry leaders believe the committee’s recommendations mark a shift in the government’s approach from viewing crypto solely through the lens of taxation to considering a broader regulatory architecture.

Vikaas M. Sachdeva, CEO of BitDelta India, said the committee’s recommendations represent a meaningful step toward regulatory clarity for India’s virtual digital asset ecosystem.

“For an industry that has long operated in an uncertain policy environment, this signals a maturing conversation between the sector and policymakers,” he said.

According to Sachdeva, establishing an interim regulatory mechanism through a recognized SRO offers a structured framework under regulatory oversight while comprehensive regulations continue to evolve. He said the crypto industry has consistently advocated a balanced, risk-based regulatory framework that protects investors without constraining innovation.

“If implemented effectively, an SRO framework can encourage responsible market conduct while creating a more transparent and resilient ecosystem,” he added.

Echoing similar views, Edul Patel, Founder and CEO of Mudrex, said the parliamentary committee has correctly identified the absence of a regulatory framework for VDAs as a significant grey area rather than a settled policy position.

“The lack of consumer protections and market conduct norms leaves investors with limited remedies against fraud, market manipulation and other risks while also stunting market development,” Patel said.

He noted that India remains one of the few major economies without even an interim crypto regulatory framework. Several leading jurisdictions have already integrated digital assets into their financial regulatory systems. Japan regulates crypto assets under securities legislation, the US applies the Howey Test to determine whether certain tokens qualify as securities, Singapore regulates eligible digital assets under its Securities and Futures Act, while the European Union has implemented the Markets in Crypto-Assets (MiCA) framework.

Patel said the committee’s recommendation for an SRO-led interim mechanism under regulatory oversight is a “practical and proportionate first step” that could establish governance standards, disclosure requirements, investor protection measures and grievance redressal mechanisms while policymakers continue work on a comprehensive law.

CoinSwitch Co-founder Ashish Singhal also described the recommendations as a positive development for India’s VDA ecosystem.

“The recommendation to introduce an interim regulatory mechanism through a recognised Self-Regulatory Organisation (SRO), under regulatory oversight, is a pragmatic approach while a comprehensive framework evolves,” he said.

Singhal added that the industry has consistently advocated a balanced regulatory model that protects investors while enabling responsible innovation. According to him, an SRO-led framework could strengthen governance standards, improve accountability and enhance investor protection during the transition period.

Meanwhile, CoinDCX Co-founder Sumit Gupta said the committee’s observations acknowledge the unique characteristics of digital assets that do not fit neatly into existing legal definitions of securities or derivatives despite being widely traded as financial assets.

In a LinkedIn post, he said the committee’s recognition that VDAs exhibit characteristics such as price discovery, organized trading platforms and significant retail participation validates the industry’s long-standing position. Gupta added that the proposed SRO-based regulatory bridge could address investor protection concerns and reduce regulatory uncertainty until a comprehensive legal framework is enacted.