India's Next Crypto Policy: What A Balanced Regulatory Framework Should Look Like

India’s virtual digital asset (VDA) sector finds itself in a regulatory bind. While VDAs are recognised under tax law, subject to anti-money laundering obligations, and monitored by the Financial Intelligence Unit (FIU-IND), the country still lacks a comprehensive law governing the sector. As a result, businesses, consumers, and regulators have long operated without clarity on the legal status and future of the Indian VDA sector.

While India’s cautious approach has been shaped by legitimate concerns around financial stability, consumer protection, and illicit finance, global conversations on VDA regulation have evolved rapidly. The European Union has operationalised the Markets in Crypto-Assets (MiCA) Regulation, the United States has advanced legislation such as the GENIUS Act and CLARITY Act, while jurisdictions across Asia have introduced licensing and consumer protection frameworks. International bodies such as the Financial Action Task Force (FATF), Financial Stability Board (FSB), and OECD have also developed common regulatory principles.

The question before India is therefore no longer whether to regulate digital assets, but how.

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Legislation Focus

India can learn from the foundational elements introduced by various jurisdictions in their regulatory approaches.  First and foremost, nearly all legislation ensures legal certainty.

For instance, jurisdictions such as the European Union and Australia have enacted comprehensive legislation defining the rights, responsibilities, and regulatory obligations of service providers, issuers, and custodians.

Principle Of Proportionality

Second, many incorporate the principle of proportionality i.e., “same activity, same risk, same regulation”.

MiCA, for instance, establishes distinct requirements for crypto-asset service providers and stablecoin issuers, while Hong Kong maintains separate licensing regimes for trading platforms and stablecoin issuers. Rather than treating all digital asset activities alike, these frameworks calibrate obligations to the functions performed and the risks involved.

Customer Protection

The third is consumer protection. The United Kingdom’s evolving regulatory framework illustrates how governance, disclosure, and operational guardrails can protect users while allowing responsible firms to innovate within clearly defined boundaries.

The pattern across these jurisdictions is consistent: each has recognised the risks associated with crypto-assets and responded with legal provisions to mitigate them, without foreclosing innovation. While Indian policymakers continue to deliberate on the appropriate regulatory approach, interim measures merit serious consideration.

A formally recognised VDA self-regulatory organisation (SRO), operating under the supervision of the Government of India, could establish baseline standards on custody, cybersecurity, listing and delisting protocols, consumer protection, grievance redressal, and law enforcement cooperation. Japan, Canada, and South Korea have each adopted SRO models to complement statutory oversight, developing operational standards, strengthening market conduct, and responding to technological change more nimbly than legislation alone can.

As Parliament and financial regulators work towards a comprehensive legal framework, a recognised SRO can bridge the gap: translating broad supervisory objectives into enforceable industry standards while the legislative process runs its course. India's next step on digital asset policy should be measured not by how restrictive it is, but by whether it creates a predictable, accountable, and innovation-friendly regulatory environment. A principles-based framework, underpinned by an effective SRO, offers the most practical path forward.

(The author is the Co-founder of CoinDCX)

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