- Parliamentary committee identifies regulatory gap for digital assets.
- Regulatory uncertainty harms investors, businesses, and innovation.
- Global markets have already embraced diverse crypto regulations.
- Interim SRO framework proposed for investor protection now.
Every so often, a policy document quietly changes the direction of a conversation. The Parliamentary Standing Committee on Finance’s recent Securities Markets Code Report could prove to be one of those moments for India’s crypto ecosystem. While the report primarily examines the future of India’s securities regulation, one observation stands out for digital assets. The Committee acknowledges that the exclusion of Virtual Digital Assets (VDAs) from the existing securities framework represents a regulatory gap but not necessarily a deliberate policy choice.
For years, the absence of regulation has often been interpreted as an unwillingness to engage with crypto. The Committee’s assessment suggests something more nuanced: the framework simply hasn’t caught up with the market. As digital assets become an increasingly important part of the financial system, that gap deserves more attention.
The Cost Of Regulatory Uncertainty
Regulatory ambiguity rarely protects investors. More often, it leaves them without meaningful safeguards. Today, millions of Indians own or trade digital assets, yet there are no dedicated market conduct standards, disclosure requirements or grievance redressal mechanisms designed specifically for this asset class. When fraud, manipulation or operational failures occur, investors have limited avenues for protection.
The uncertainty also affects the broader ecosystem. Responsible businesses operate without regulatory clarity. Institutional participants remain cautious. Innovation slows because long-term investment depends on predictable rules.
The risks associated with crypto do not disappear simply because regulation is absent. They become harder to supervise, harder to mitigate, and ultimately more costly for everyone involved.
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The Global Conversation Has Already Moved Forward
India’s cautious approach stands in contrast to the direction taken by most major financial markets. The Standing Committee itself highlights how different jurisdictions have addressed digital assets through existing legal frameworks or dedicated legislation.
Japan has brought crypto assets under its securities framework. The United States applies established securities principles, including the Howey Test, where appropriate. Singapore regulates qualifying digital assets under its Securities and Futures Act. The United Kingdom has introduced dedicated crypto regulations, while the European Union’s Markets in Crypto-Assets (MiCA) framework provides comprehensive rules for digital assets that fall outside existing financial legislation.
These frameworks differ in design, but they share an important philosophy. None of these jurisdictions waited for the perfect law before taking action. They established guardrails first and continued refining regulation as the market evolved. Progress became an ongoing process rather than a one-time legislative event.
Technology Shouldn’t Determine Regulation
One of the report’s strongest recommendations is its support for technology-neutral regulation. Financial regulation should govern the economic function of an asset rather than the technology that powers it.
At the same time, the Committee acknowledges an important reality. Virtual Digital Assets do not always fit neatly into traditional definitions of securities or derivatives, yet they are increasingly bought, sold and held as financial assets.
That is precisely where today’s disconnect lies. Millions of Indians treat digital assets as investments. Institutions around the world increasingly view them as part of diversified portfolios. Yet India’s regulatory architecture has not fully adapted to reflect this shift.
The gap today is not simply one of legal definitions. It is a gap between how markets function and how regulation currently views them.
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Why An Interim SRO Framework Makes Sense
This is where the Committee offers perhaps its most practical recommendation. Rather than waiting for a comprehensive legislative framework, which will understandably require time, the report proposes considering an interim framework built around a Self-Regulatory Organisation (SRO) operating under the oversight of an appropriate regulator.
This is a pragmatic approach. Building a comprehensive regulatory regime is a long-term exercise. Protecting investors cannot wait for every legislative question to be resolved.
An SRO-led framework can establish baseline market standards without prejudging the shape of future legislation. It provides a mechanism to improve governance today while allowing policymakers the flexibility to develop a more comprehensive framework over time. Most importantly, it creates accountability where little currently exists.
A Practical Way Forward
India does not have to choose between immediate action and comprehensive regulation. Both can happen together.
A well-designed interim framework can strengthen investor protection, improve market conduct and provide regulatory clarity while policymakers continue developing a long-term legislative approach.
The Parliamentary Standing Committee has opened the door to a more constructive conversation. It recognises digital assets as a growing part of modern finance and acknowledges that regulatory uncertainty is itself a policy risk.
An interim, SRO-led framework would protect investors, encourage responsible innovation and demonstrate that India is prepared to regulate emerging financial technologies with the same balance and pragmatism it has applied to other parts of its financial system, and that would be an important first step for India’s broader financial future.
(The author is the CEO of Mudrex)
Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.
