The Parliamentary Standing Committee on Finance has sought a “comprehensive examination” and an “appropriate regulatory framework” for Virtual Digital Assets (VDAs), such as cryptocurrencies, in its report on the proposed Securities Markets Code, 2025.
The committee has proposed that, until such a legislative framework is drawn up, the government may consider introducing an interim arrangement through recognised Self-Regulatory Organisations (SROs) functioning under the oversight of a designated regulator, such as the Reserve Bank of India (RBI) or the Securities and Exchange Board of India (SEBI).
Let’s take a closer look at what the House finance panel said.
1. The definition of securities excludes VDAs, creating a ‘regulatory grey area’.
The committee noted that the proposed Securities Markets Code adopts a technology-neutral definition of securities; however, it excludes VDAs that do not satisfy the legal characteristics of securities or derivatives under the proposed framework.
This exclusion creates a regulatory grey area, which, in turn, leads to regulatory uncertainty and exposes investors to heightened risks of fraud, market manipulation, misinterpretation, and inadequate grievance redressal. Furthermore, it creates an environment for regulatory arbitrage.
“Such uncertainty may adversely affect investor confidence and undermine the integrity, transparency and orderly development of the securities market,” the committee said.
It is pertinent to mention that although crypto transactions are taxed in India and crypto exchanges are required to comply with anti-money laundering laws, there is no dedicated law governing aspects such as transparency, governance, disclosure, investor protection and grievance redressal.
2. Many categories of VDAs resemble securities or derivatives, yet remain unregulated.
According to the House finance committee, many categories of VDAs are increasingly being traded and invested in as financial assets. They also exhibit characteristics commonly associated with securities and derivatives, such as:
- Investment for financial returns
- Tradability on organised platforms
- Price discovery through market forces, speculative trading, and leverage
- In some cases, exposure to the value or performance of an underlying asset or index
Despite these similarities, VDAs are not expressly recognised or regulated under the proposed Code because they do not “independently” satisfy the statutory definition of a security or derivative.
3. Set minimum standards of governance and compliance in VDA sector. In light of the growing popularity of VDAs and increasing retail participation in the sector, the committee proposed establishing a regulatory framework governing cryptocurrencies, NFTs, and other digital tokens.
“Such a framework should prescribe minimum standards of governance, transparency, disclosure, investor protection, grievance redressal, compliance…
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