India's Parliamentary Finance Committee has proposed creating a Self-Regulatory Organisation (SRO) to temporarily oversee the cryptocurrency and virtual digital assets (VDA) sector. This move follows the Reserve Bank of India’s recent warnings about the risks posed by crypto assets.
Interim Oversight to Fill Regulatory Void
On July 23, 2026, the committee submitted Report No. 36 recommending an interim framework that places an SRO under the supervision of either the RBI or the Securities and Exchange Board of India (SEBI). The SRO would be responsible for enhancing investor safety, enforcing governance standards, promoting transparency, ensuring compliance, segregating customer funds, and providing mechanisms for resolving complaints.
This proposal comes as India’s crypto market continues its rapid growth despite lacking a formal legal framework. Estimates suggest there are between 39 million to over 119 million crypto investors in India holding assets worth approximately ₹20,437 crore ($2.4 billion) by mid-2026.
Regulatory Challenges and Investor Risks
Although cryptocurrencies in India face a 30% tax rate plus 1% tax deducted at source (TDS) and are subject to anti-money laundering (AML) laws, the absence of dedicated statutory regulation leaves investors exposed to fraud and market abuses. The RBI has expressed ongoing concerns that crypto assets threaten financial stability, monetary sovereignty, and could facilitate illicit activities such as money laundering and terror financing.
Recent enforcement actions shows these vulnerabilities. In July 2026, the Enforcement Directorate launched an investigation into a ₹337 crore crypto scam involving prominent "Key Opinion Leaders" who allegedly misled investors with discounted token schemes. Such incidents have strengthened calls for an interim SRO-led supervisory structure.
The committee also recommended that the government consider establishing a specialized statutory framework for cryptocurrencies, non-fungible tokens (NFTs), and decentralized finance (DeFi) tokens. It emphasized that future securities legislation should be technology-neutral to cover tokenized securities on blockchain platforms effectively, avoiding regulatory loopholes.
India Moves Toward Broader Crypto Regulation Beyond Tax Rules offers further insight into the country's evolving approach to crypto oversight.
