Can Parliamentary Panel’s Latest Recommendations Break Crypto Policy Deadlock?

For years, India’s approach towards cryptocurrencies has largely revolved around taxation, anti-money laundering (AML) compliance and transaction reporting, while a comprehensive regulatory framework has remained elusive. 

Now, the Parliamentary Standing Committee on Finance’s recommendations on the proposed Securities Markets Code, 2025, have reignited hopes within the crypto industry that the policy conversation may finally be moving beyond taxing crypto transactions towards regulating the market itself. 

The committee has recommended creating an interim regulatory mechanism for virtual digital assets (VDAs) through a recognised self-regulatory organisation (SRO) operating under a designated regulator. It has also sought greater clarity on how crypto investment products and tokenised securities should be treated under the proposed law.  

The recommendations do not change India’s regulatory framework. But for many in the industry, they represent something equally significant: a parliamentary panel formally acknowledging 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,” Mudrex founder and CEO Edul Patel told Inc42.  

According to Patel, the committee has, for the first time in a parliamentary document, recognised that excluding VDAs from India’s securities framework has created a regulatory gap that needs to be addressed. 

India currently taxes income from VDAs at 30%, levies a 1% TDS on specified VDA transfers above prescribed thresholds, and requires crypto exchanges and other VDA service providers to register with the Financial Intelligence Unit-India (FIU-IND) under the Prevention of Money Laundering Act (PMLA) framework. However, the country is yet to introduce a comprehensive law governing the sector. 

SB Seker, head of APAC at Binance, believes the committee’s observations indicate that policymakers are beginning to look beyond compliance measures. 

“The Parliamentary Standing Committee’s recommendations signal a shift in the right direction towards a more comprehensive framework for the regulation of digital assets,” Seker said.

Who Should Regulate Crypto? 

The committee’s recommendations also revive another long-running debate: should all digital assets be regulated under one framework? Industry executives argue the answer is no.

They contend that cryptocurrencies, stablecoins, tokenised securities and other blockchain-based assets perform fundamentally different economic functions and therefore should not be regulated together simply because they are built on similar technology.

“VDAs are not one asset class, and treating them as one is what created the current grey area,” Patel said.

He suggested broadly classifying digital assets into three buckets – tokenised securities and real-world assets such as equities, bonds and gold; payment-oriented assets such as stablecoins; and crypto-native assets such as Bitcoin and Ethereum. 

Under such a framework, tokenised securities could come under SEBI’s jurisdiction, payment-oriented assets could fall within the RBI’s remit, while crypto-native assets could be governed under a dedicated VDA framework supported by the proposed SRO. 

WazirX vice president Rajgopal Menon said regulatory responsibilities should be assigned according to the nature of each activity, with coordination between regulators becoming increasingly important as digital asset businesses expand across multiple segments. 

A Push For Tokenised Assets 

Beyond cryptocurrencies, industry executives believe the committee’s recommendations could have implications for the tokenisation of traditional financial assets. 

Tokenisation involves representing ownership of assets such as equities, bonds, fund units or even property through blockchain-based digital tokens. The committee’s emphasis on a technology-neutral Securities Markets Code suggests that a financial instrument should continue to be regulated according to its underlying characteristics, regardless of whether it exists on conventional market infrastructure or blockchain. 

Manhar Garegat, India head at Liminal Custody, said this could remove a key ambiguity around tokenised securities.

“A security can exist on distributed ledger technology or blockchain in the form of a digital asset and still qualify as a security, provided it satisfies the criteria laid down under the Code,” Garegat said.

Sidharth Sogani Jain, founder, CEO and fund manager at Blue Aster Capital and CREBACO Global, further noted that tokenisation is increasingly being viewed globally as an evolution of financial market infrastructure rather than the creation of a new asset class. However, legal ownership, custody, settlement, investor protection, and market integrity would still need to be addressed before large-scale adoption. 

Patel said the clarification could give issuers and market infrastructure institutions greater confidence to experiment with tokenised bonds, funds and other real-world assets without waiting for the broader VDA framework to be finalised. 

Can An SRO Fill The Gap? 

The committee’s proposal for an interim SRO has also received broad support from industry executives, although most see it as a bridge rather than a permanent solution.

Patel said an effective SRO should be empowered to prescribe membership standards, mandate disclosures and audits, suspend non-compliant platforms and operate an effective grievance redressal mechanism.

However, Garegat believes the quality of regulatory supervision will matter more than the breadth of SRO’s independent powers. 

Seker described an interim SRO-led framework as a “pragmatic first step”, provided it is backed by clear governance standards, transparency and investor protection. 

Industry stakeholders agree that licensing, statutory enforcement and policymaking must ultimately remain with the government and the designated regulator.

For now, the committee’s recommendations remain non-binding, and whether they translate into policy will depend on the government’s response and the actions it takes. 

Whether this finally breaks India’s crypto policy deadlock remains to be seen. But for an industry that has spent years navigating uncertainty, the committee’s recommendations have at least restarted a conversation that had long appeared to be stuck.

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