India’s Finance Ministry has opposed creating a comprehensive regulatory regime for cryptocurrencies, according to reports on the committee’s proceedings arguing that formal regulation could legitimise the sector and give retail investors a false sense of security. The position emerged during the Parliamentary Standing Committee on Finance’s study of Virtual Digital Assets (VDAs), which heard the Department of Economic Affairs on September 16.
Government Flags Crypto Regulation Risks
The Economic Affairs Division of the Finance Ministry told the committee chaired by BJP MP Bhartruhari Mahtab that crypto assets pose ‘inherent challenges and contradictions’ as transactions can occur outside conventional state-controlled financial systems.
The ministry reportedly warned that regulation ‘may create a false sense of security’ and moral hazard among inexperienced investors. It also argued that tighter rules for centralized intermediaries can push activity toward decentralized and non-custodial arrangements that are harder to supervise.
India nevertheless regulates parts of the crypto ecosystem through taxation and anti-money-laundering rules. VDA service providers carrying out specified activities have been treated as reporting entities under the Prevention of Money Laundering Act since March 2023. FIU-IND guidelines require customer due diligence, record-keeping, and transaction monitoring.
FIU Enforcement Continues
On September 9, FIU-IND issued non-compliance notices to 15 offshore VDA service providers, including Weex, Blofin, Bitunix, DigiFinex, Toobit and WOO X. Authorities also directed action to block their applications and URLs in India.
Crypto gains in India are subject to a 30% tax regime, while losses from one VDA generally cannot be offset against gains from another.
Government Pushes Digital Rupee
Separately, India is expanding the Reserve Bank of India’s digital rupee. Government data showed the retail CBDC pilot had recorded 13 crore cumulative transactions and 92 lakh participating users by January 2026.
In August, the government launched CBDC-based Direct Benefit Transfer under PMGKAY in Chandigarh and Dadra & Nagar Haveli, positioning the e-rupee as infrastructure for welfare delivery.
The parliamentary committee has now concluded its VDA discussions. Mahtab said the panel identified ‘grey areas’ and is awaiting the government’s response before preparing its final report.
Also Read: India’s RBI Pushes Crypto Ban as Tax Data Exposes Wide Compliance Gaps
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