Authored by :
Dilip Chenoy
Chairperson, Bharat Web3 Association
New Delhi: The Parliamentary Standing Committee on Finance’s recommendations on the Securities Markets Code, 2025 represent an important milestone in India’s evolving approach to the regulation of virtual digital assets. By recommending that the Government comprehensively examine the need for a statutory and regulatory framework for the sector, while also considering an interim regulatory mechanism through recognised self-regulatory organisations operating under the oversight of the designated regulator, the Committee has provided a thoughtful and balanced pathway for addressing an area that has, until now, remained outside a comprehensive regulatory framework.
For the digital asset ecosystem, this is a welcome and significant development. It is the first time that a Parliamentary Committee has examined the place of virtual digital assets within India’s broader financial regulatory architecture and articulated a considered approach for addressing the existing regulatory gap. The recommendation reflects a careful appreciation of both investor protection imperatives and the need to support responsible innovation.
The Committee’s observations merit close attention. It recognises that while the proposed Securities Markets Code adopts a technology-neutral definition of securities, many categories of virtual digital assets fall outside that definition because they do not satisfy the legal characteristics of securities or derivatives. At the same time, it acknowledges that these assets are increasingly traded and held as financial assets, exhibiting many of the economic characteristics associated with traditional investment products. In doing so, the Committee identifies a regulatory gap that may expose investors to risks relating to market conduct, transparency, consumer protection and grievance redressal.
This assessment reflects the present regulatory landscape. India’s virtual digital asset sector is subject to important obligations under the Prevention of Money Laundering Act and the Income-tax Act. Registered virtual digital asset service providers comply with robust anti-money laundering, reporting and tax obligations that have strengthened regulatory oversight in these areas. However, there remains no comprehensive framework governing market conduct, operational standards, disclosure practices, consumer protection or dispute resolution. These are matters that directly affect investor confidence and the long-term development of the sector.
The Committee’s recommendation for an interim framework based on recognised self-regulatory organisations operating under regulatory oversight offers a pragmatic way forward. Importantly, the recommendation does not advocate self-regulation in isolation. Rather, it envisages a co-regulatory model in which recognised organisations operate within clearly defined standards established and supervised by the designated regulator. Such an approach can help introduce consistent governance, transparency, disclosure and investor protection measures while providing regulatory flexibility during the period in which a comprehensive statutory framework is developed.
The recommendation is also timely from a broader policy perspective. Regulatory uncertainty rarely diminishes participation in digital assets; instead, it often shifts activity towards jurisdictions or platforms operating beyond the domestic regulatory perimeter. A well-designed regulatory framework can encourage responsible innovation within India, strengthen consumer confidence, and support compliant businesses that have invested significantly in meeting existing legal and regulatory obligations.
India has emerged as one of the world’s leading markets for digital asset adoption and blockchain innovation. During its G20 Presidency, India played a constructive role in advancing international discussions on crypto-asset regulation. Building on that leadership through a balanced domestic framework would reinforce India’s position as a jurisdiction that combines innovation with responsible governance.
The Standing Committee has made an important contribution by recognising both the opportunities and the regulatory challenges associated with virtual digital assets and by proposing a constructive pathway forward. The recommendations provide a strong parliamentary basis for further policy deliberation.
As the Government considers the next steps, this presents a valuable opportunity to develop a balanced and future-ready regulatory framework that strengthens investor protection, promotes market integrity, supports responsible innovation, and enables the sustainable growth of India’s digital asset ecosystem.
