Need a regulatory framework for virtual digital assets, says House finance panel

Taxed but Unwatched: What the SRO Proposal Really Admits

A number like 12 crore usually gets treated as a market opportunity in economic writing. Here it should be read as an exposure figure instead. That is roughly how many Indians are trading virtual digital assets right now, according to Chainalysis and every single one of them is currently operating inside a system that taxes their gains but does not govern the platform they trade on.

The Gap the Number Hides

Zoom into what "no market regulator" actually means for one of these 12 crore people. If a stockbroker mismanages your money, SEBI has a grievance redressal mechanism, disclosure norms and the power to penalise. If a VDA exchange mismanages your money - freezes withdrawals, misrepresents its reserves or simply vanishes - there is no equivalent body with jurisdiction.

The Prevention of Money Laundering Act requires that exchange to verify your identity and report suspicious transactions. The Income-tax Act taxes your gains at a flat 30 percent with no loss offset. Neither of these touches whether the exchange is solvent, honest or fair to you as a customer.

The state has built a fiscal net and an anti-laundering net, but not a protective one.

Why the Securities Market Code Couldn't Just Absorb This The

SMC was drafted to be "technology-neutral"

• a deliberate design choice meant to future-proof the definition of a security so it doesn't need amending every time a new instrument appears. But VDAs don't satisfy the legal characteristics of securities or derivatives under that definition, so technology-neutral language ends up excluding them rather than including them. The Committee's own words are blunt: this creates a "regulatory grey area," and that grey area translates into "heightened risks of fraud, market manipulation, misrepresentation and inadequate grievance redressal" for the actual people trading inside it.

What the SRO Proposal Is Actually Conceding

The recommendation for an interim Self-Regulatory Organisation, operating under a designated regulator's oversight, is not a minor technical fix - it is Parliament's own committee conceding that five years of taxing and monitoring VDAs without governing them has left millions exposed and that waiting for a full standalone law is no longer defensible.

An SRO would prescribe governance standards, transparency disclosures and grievance redressal even before a comprehensive Act exists - essentially borrowing a model banking and mutual funds have used for decades to self-police an industry while formal legislation catches up.

The tension for Mains aspirants to actually hold onto isn't "should crypto be banned or allowed"

• that debate is largely settled by the tax regime already treating it as a legitimate, if risky, asset class. The real tension is narrower and sharper: can a state credibly tax and monitor an asset class for a decade while declining to protect the person holding it? The Committee's report is the first time that question has been asked from inside Parliament rather than outside it.