3 min readNew DelhiUpdated: Jul 24, 2026 09:26 AM IST
The Parliamentary Standing Committee on Finance, in its report on the Securities Market Code (SMC), has called for a “comprehensive examination” and an “appropriate regulatory framework” for Virtual Digital Assets (VDAs) such as cryptocurrencies.
The committee has also recommended that pending the establishment of such 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. Recognising that there was an “existing regulatory vacuum” in the regulation of VDAs, the committee has stated that risks should be mitigated; investor interests should be safeguarded and market discipline ensured while such a regulatory framework was drafted.
“Such a framework should prescribe minimum standards of governance, transparency, disclosure, investor protection, grievance redressal, compliance with prescribed codes of conduct and appropriate regulatory oversight,” it said.
According to blockchain data and analytics company Chainalysis, nearly 12 crore Indians are participating in the VDA ecosystem. The committee has discussed reasons why VDAs were being excluded under the proposed changes in the Securities Markets Code since it adopts a “technology-neutral” definition of securities and such VDAs do not satisfy the legal characteristics of securities and derivatives under the proposed framework.
Thus, a new regulatory framework, the committee said, was necessary since the exclusion would be a “regulatory grey area.” It said “(this) would result in regulatory uncertainty, exposing investors to heightened risks of fraud, market manipulation, misrepresentation and inadequate grievance redressal, while also creating opportunities for regulatory arbitrage”. And that such uncertainty may adversely affect investor confidence and undermine the integrity, transparency and orderly development of the securities market. Although India does not yet have a legal regime for VDAs, the sector was subject to regulation for the purpose of anti-money laundering and taxation.
To avoid any ambiguity and to ensure regulatory certainty, clarity on whether VDAs or crypto assets could be included or excluded was needed.
Giving the view of the Centre, the Committee has said that there was an admission that VDAs and crypto-assets were indeed presently unregulated in India, except for the limited purpose of taxation, preventing of money laundering and reporting and that any regulatory framework for such assets would require “significant international and domestic coordination”.