Cryptocurrency – Finance Panel Calls for Wider Consultations Before Crypto Regulation
Cryptocurrency –The Parliamentary Standing Committee on Finance has advised that any proposal to regulate cryptocurrencies and other Virtual Digital Assets (VDAs) through the upcoming Securities Markets Code should only move forward after detailed policy discussions involving multiple regulators and government departments. The panel believes that such an important policy decision requires careful coordination rather than being incorporated into the new law at this stage.
Securities Markets Code Designed as Technology-Neutral Law
While reviewing the draft Securities Markets Code, 2025, the committee observed that the proposed legislation has been framed as a technology-neutral legal framework. This approach ensures that tokenised forms of conventional financial instruments, including shares, bonds and investment scheme units, can continue to be regulated under India’s securities laws regardless of the technology used to issue or trade them.
At the same time, the committee pointed out that cryptocurrencies lacking the legal characteristics of securities or derivatives may not automatically fall within the scope of the proposed Code.
Finance Ministry Clarifies Current Legal Position
According to the committee’s report, the Ministry of Finance stated that digital assets classified as cryptocurrencies would remain outside the definition of securities if they do not satisfy the legal criteria laid down under the Securities Contracts (Regulation) Act, 1956, or the proposed Securities Markets Code.
The Ministry explained that the digital nature of an asset or the terminology used to describe it does not determine whether it qualifies as a security. Instead, its legal characteristics remain the deciding factor under the existing regulatory framework.
Limited Regulatory Oversight Continues
The report also highlighted that crypto-assets currently do not operate under a comprehensive regulatory regime in India. Government oversight is presently confined to specific areas such as taxation, anti-money laundering measures and mandatory reporting obligations.
According to the Ministry, no broader legal framework currently governs Virtual Digital Assets beyond these limited compliance requirements. The government has maintained that a wider regulatory structure has yet to be developed for the sector.
Government Seeks Broader Policy Consensus
The committee noted that the Centre considers cryptocurrency regulation a complex issue requiring cooperation at both the domestic and international levels. The Ministry informed the panel that developing a complete regulatory framework would involve extensive consultations among various regulators, ministries and stakeholders.
For this reason, it believes that incorporating Virtual Digital Assets into the Securities Markets Code at the present stage may not be appropriate. Instead, broader policy deliberations should take place before any such decision is made.
Investment-Like Crypto Products Under Observation
During its examination, the committee also discussed certain crypto-based arrangements that involve pooled investor funds, passive participation by investors and management by third parties. It observed that such structures may resemble traditional investment schemes in certain circumstances.
Although these products are not currently covered under the proposed framework, the committee indicated that they could require a dedicated enabling regulatory mechanism in the future if they continue to evolve in ways similar to regulated investment products.
Global Regulatory Models Offer Reference
The report also reviewed international approaches to cryptocurrency regulation. It noted that several major jurisdictions, including the United States, Singapore, the United Kingdom and the European Union, generally follow technology-neutral regulatory principles.
Under these models, crypto-assets displaying the features of securities are regulated through existing securities laws, while other categories of digital assets are governed under separate legal and regulatory frameworks. The committee suggested that these international practices provide useful reference points as India continues to evaluate its long-term approach to regulating the rapidly evolving digital asset ecosystem.