Parliamentary Panel Seeks Crypto Regulatory Clarity, Suggests SRO-Led Framework

The Parliamentary Standing Committee on Finance has recommended introducing an interim regulatory framework for cryptocurrencies and Virtual Digital Assets (VDAs) as India continues to operate without a comprehensive legal framework for the sector. The recommendation was made in the committee’s 36th report on the proposed Securities Markets Code, 2025, which was presented in Parliament on July 23.

How Will SROs Help Regulate Crypto

The committee suggested that the interim mechanism could be introduced through recognised Self-Regulatory Organisations (SROs). It said, “Pending the establishment of a comprehensive legislative framework, the Government may consider introducing an interim regulatory mechanism through recognised Self-Regulatory Organisations (SROs) operating under the oversight of the designated regulator.”

It notes the framework should prescribe minimum standards related to governance, transparency, disclosures, investor protection, grievance redressal, compliance with prescribed codes of conduct and regulatory oversight.

The panel said such a framework would help address risks arising from the existing regulatory gap while promoting market discipline and protecting investor interests.

Why Are VDAs Outside The Existing Securities Framework

The committee noted that although several categories of Virtual Digital Assets are increasingly traded and invested in as financial assets, they may not qualify as securities or derivatives under existing legal definitions. This regulatory gap could expose investors to risks including fraud, market manipulation, misrepresentation and inadequate grievance redressal.

The report indicates that VDAs can have characteristics similar to financial instruments, including investment for financial returns, trading on organised platforms, price discovery through market forces, speculative activity and, in some cases, exposure to the value or performance of underlying assets. While crypto assets that do not qualify as securities or derivatives may remain outside the scope of the proposed Securities Markets Code.

The committee observed that tokenised representations of existing securities, such as shares, bonds or units of investment schemes, would continue to fall under the definition of securities even if the record-keeping system shifts to distributed ledger technology or tokenised platforms.

What Is India’s Current Crypto Regulatory Position

The committee also noted that India does not currently have a dedicated legal regime for Virtual Digital Assets. At present, crypto assets are regulated only for limited purposes such as taxation, prevention of money laundering and reporting requirements.

The government informed the panel that bringing VDAs under the Securities Markets Code would require broader policy consideration and consultations among regulators and departments. It added that any regulatory framework for crypto assets would require significant international and domestic coordination.

The panel also examined regulatory approaches adopted by various jurisdictions, including the UK, Singapore, the US and the European Union, and highlighted the need for coordination to develop an effective framework for monitoring and regulating crypto assets.

Edul Patel, Founder and CEO of Mudrex, said, “While we await a comprehensive policy framework, the Committee’s recommendation for an interim, Self-Regulatory Organisation (SRO)-led mechanism under a designated regulator’s oversight is a practical and proportionate first step.” He added that India’s crypto industry is well-positioned to adopt a framework focused on governance, disclosure, investor protection and grievance redressal.