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Virtual Digital Asset: Government Clarifies Plans For VDA Regulation

Virtual Digital Assets (VDAs) are being actively discussed by the government as it works on regulatory measures

The Indian government has provided important updates on the regulation of Virtual Digital Assets (VDAs) in India. During the Lok Sabha session on December 16, 2024, the government discussed the steps being taken toward regulating VDAs and the challenges in creating a comprehensive framework. Addressing the questions raised, the Minister of State for Finance, Pankaj Chaudhary, highlighted the government’s approach to tackling VDA-related issues, focusing on international cooperation and investor protection.

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No Timeline for VDA Regulation

Chaudhary affirmed that although the government acknowledges the necessity of regulating the VDA industry, a timeframe for implementing thorough regulatory rules has not been established. The delay is attributed to the borderless nature of VDAs, which requires global coordination to prevent regulatory arbitrage. The Minister emphasized that significant international collaboration is essential, and discussions at the international level are ongoing.

Pankaj further mentioned that the government is preparing a discussion paper on VDA regulation. Since it will rely on how hazards in the industry change and the requirement to conform to international standards, the release date has not yet been determined.

India’s Role in Global VDA Regulation

Given that virtual digital assets (VDAs) are borderless, Pankaj Chaudhary emphasised the significance of international collaboration in their regulation. India actively participates in global initiatives, especially by adopting the G20 Roadmap on Crypto Assets. This roadmap seeks to establish a unified worldwide strategy for virtual digital assets (VDA) regulation. Addressing the potential and hazards these assets offer, particularly for developing and emerging countries.

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Current Oversight Measures for VDAs

Despite the ongoing development of a comprehensive regulatory framework, the government has already taken action to regulate VDAs.

To reduce money laundering associated with VDAs, the government introduced VDA transactions under the Prevention of Money Laundering Act (PMLA) in March 2023. The Income Tax Act of 1961 ensures that VDA earnings are taxed similarly to other types of income.

The Companies Act of 2013 and the Information Technology Act of 2000 are two examples of current laws that the government is now using to govern the VDA industry. The ministry reiterated its commitment to working with international partners, stressing the importance of global cooperation due to the international nature of VDAs.

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