A new policy has emerged in India, as a parliamentary committee has asked the Indian government to allow industry-run Self-Regulatory Organizations to regulate India’s crypto market under the auspices of the Reserve Bank of India (RBI) or Securities and Exchange Board of India (SEBI).
This presents a temporary solution for the 39 million people who trade digital assets without any regulation to protect them.
An interim watchdog while a permanent legislation awaits
The Parliamentary Standing Committee on Finance made the recommendation in its 36th report on the proposed Securities Markets Code, 2025. The report was brought before Parliament on July 23. The panel believes recognized SROs should enforce conduct standards for now, while proper crypto legislation is in the works.
The Self-Regulatory Organizations (SROs) would be under the supervision of the Reserve Bank of India or the Securities and Exchange Board of India.
Utmost priority will be placed on investor protection, with SROs expected to audit exchange reserves, separate customer money legally from company balance sheets, and manage complaints from customers.
The committee observed the systems operational in the United Kingdom, Singapore, the United States, and the European Union before arriving at the idea of an SRO.
Taxed at 30% but without legal recognition
India currently has no statute recognizing digital assets as a formal asset class. What it does have, however, is a 30% flat tax on crypto profits and a 1% tax deducted at source on transactions, as Cryptopolitan reported before. It also has a Financial Intelligence Unit where money-laundering cases are reported and handled.
The absence of any legislation is where the problem lies and is what the panel is trying to solve. According to the Ministry of Finance, crypto-assets are outside India’s regulatory purview except for taxation, anti-money-laundering, and reporting rules.
The committee also sought clarity with the legal definitions of digital assets because some tokens may act like securities, some like derivatives, and others may belong in a whole different category.
The RBI still tilts towards a ban
The recommendation comes weeks after the Reserve Bank of India pushed for the outright prohibition of crypto for banks while contemplating the banning of private fiat-backed cryptocurrencies. The RBI suggested to the committee in May and June, claiming dollar-pegged stablecoins would interfere with India’s monetary sovereignty.
The tax authorities agree with the RBI. Tax officials believe offshore trades are tough to track, with less than 25% of the 645,000 people who transacted in crypto in the year to March 2023 reporting their profit.
The RBI said the domestic market had 54 FIU-registered service providers and 39.3 million KYC-verified users holding ~20,437 crore rupees, approximately $2.4 billion.
Why the offshore drain is a strong argument
Critics of the present taxation system argue that it has driven crypto activity out of the country, rather than increasing it.
Raghav Chadha, a member of Rajya Sabha, told Parliament in February that about 73% of India’s crypto volume had moved to foreign exchanges and about 120 million Indians make use of foreign platforms, with ~180 crypto startups leaving the country. He argues, “Prohibition is not protection. Regulation is protection.”
Manhar Garegrat, head of Liminal Custody, told NDTV the recommendations are “a constructive step toward building a more mature digital asset ecosystem in India.”
The next steps lie with the government, which the committee expects to draft robust legislation as well as legal definitions of digital assets, all with the goal of assisting the interim SROs.
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