A parliamentary committee in India has recommended that the government permit industry-led Self-Regulatory Organizations to oversee the country's crypto market under the supervision of the Reserve Bank of India (RBI) or the Securities and Exchange Board of India (SEBI).

The proposal is intended as an interim framework for roughly 39 million people trading digital assets in India without a dedicated regulatory regime designed to protect them. It comes after multiple earlier attempts at crypto legislation stalled, including a draft bill listed for parliamentary consideration in 2021 that was never introduced.

Interim oversight while legislation is pending

The Parliamentary Standing Committee on Finance issued the recommendation in its 36th report on the proposed Securities Markets Code, 2025. The report was presented to Parliament on July 23. The committee said recognized Self-Regulatory Organizations, or SROs, should enforce standards of conduct while broader crypto legislation is being developed.

Under the proposal, the SROs would operate under the oversight of either the Reserve Bank of India or the Securities and Exchange Board of India.

Investor protection would be a central focus. The committee expects SROs to audit exchange reserves, ensure customer funds are legally separated from company balance sheets, and handle customer complaints.

Before recommending the SRO model, the committee reviewed systems operating in the United Kingdom, Singapore, the United States, and the European Union.

Standing committee reports in India are advisory; the government is not legally required to adopt their recommendations, though they typically inform subsequent policy and legislative drafting.

Crypto is taxed but not legally recognized as an asset class

India does not currently have a statute that recognizes digital assets as a formal asset class. It does, however, impose a 30% flat tax on crypto profits and a 1% tax deducted at source on transactions, as Cryptopolitan has previously reported. India also has a Financial Intelligence Unit that receives and handles money-laundering-related reports.

The lack of dedicated legislation is the gap the panel is attempting to address. According to the Ministry of Finance, crypto-assets remain outside India's regulatory framework except for taxation, anti-money-laundering, and reporting requirements.

The committee also called for clearer legal definitions of digital assets, noting that some tokens may function like securities, others like derivatives, and others may fall into a separate category altogether.

RBI continues to favor restrictions

The recommendation follows recent calls from the Reserve Bank of India for an outright prohibition on crypto for banks, while also considering a ban on private fiat-backed cryptocurrencies. The RBI made the suggestion to the committee in May and June, arguing that dollar-pegged stablecoins would interfere with India's monetary sovereignty.

Tax authorities have aligned with the RBI's concerns. Officials have argued that offshore trades are difficult to track, and that fewer than 25% of the 645,000 people who transacted in crypto in the year to March 2023 reported their profits.

The RBI said India's domestic market included 54 FIU-registered service providers and 39.3 million KYC-verified users holding approximately 20,437 crore rupees, or about $2.4 billion.

Offshore activity remains a key concern

Critics of India's current tax approach argue that it has pushed crypto activity overseas rather than expanding domestic compliance.

Raghav Chadha, a member of Rajya Sabha, told Parliament in February that about 73% of India's crypto volume had shifted to foreign exchanges. He also said about 120 million Indians use foreign platforms and that roughly 180 crypto startups have left the country. Chadha said, "Prohibition is not protection. Regulation is protection."

The tension between capital flight and regulatory caution is not unique to India. During its 2023 G20 presidency, India pushed for coordinated international crypto regulation, and the IMF and FSB jointly produced synthesis papers at its request recommending a comprehensive policy framework rather than isolated national bans.

Manhar Garegrat, head of Liminal Custody, told NDTV that the recommendations are "a constructive step toward building a more mature digital asset ecosystem in India."

The next stage rests with the government, which the committee expects to draft robust legislation and legal definitions for digital assets, while supporting the proposed interim SRO framework.