India's Crypto Rules Still in Limbo After Key Parliament Hearing

Parliament's finance committee spent a full year holding hearings on how to regulate crypto in India. On September 16th, it wrapped up the last of them without producing anything you could actually call a decision.

A Year of Hearings, Still No Law

The Standing Committee on Finance began its study on "Virtual Digital Assets and the Way Forward" back in September 2025. VDA is the term Indian law actually uses instead of "crypto" or "cryptocurrency" — it covers Bitcoin, Ethereum, and pretty much any token you'd trade on an exchange. Twelve months, several postponed sessions, and one cancelled hearing later, the committee finally got its last round of testimony from the Finance Ministry's Department of Economic Affairs on September 16.

No bill was tabled. No fresh rules were announced. What came out instead was a fairly blunt admission from the panel's own chairperson, Bhartruhari Mahtab, about the state of limbo Indian crypto users have been sitting in for years now.

"The basic question that arises for this committee is government is not accepting virtual digital assets, doesn't want to regulate it, but not regulating it also leaves greater scope for different types of indulgences."

That's about as close as an official gets to saying: we've built a legal grey zone and left millions of people standing in it.

Why the Government Can't Make Up Its Mind

The holdup isn't a lack of ideas — it's that the regulators involved don't agree with each other. The Reserve Bank of India has consistently pushed for something close to prohibition, arguing that crypto assets pose systemic risks to an economy like India's, and wants banks kept fully insulated from any exposure to them. SEBI, along with chartered accountants' bodies and much of the industry, wants the opposite: clear, workable rules rather than a permanent state of "neither legal nor illegal."

To bridge that gap, the committee has floated an interim fix — a self-regulatory model where recognised industry bodies, called SROs (self-regulatory organisations), would oversee exchanges and platforms under the watch of a designated regulator like SEBI or RBI, until Parliament eventually passes a full law. It's a stopgap, not a solution, and the government still hasn't formally responded to it.

• RBI: leans toward prohibition, wants banks kept out of crypto exposure entirely
• SEBI and industry bodies: want a clear regulatory framework, not silence
• The committee's own proposal: SRO-led interim oversight until a dedicated law exists
• The government's actual position, a year on: no formal reply to any of it

The One Thing That Definitely Isn't Changing: Tax

While the regulatory question stays unresolved, the tax treatment hasn't budged an inch. Crypto gains in India are still taxed at a flat 30%, plus a 4% cess on top (a cess is an extra surcharge the government adds for a specific purpose, health and education in this case), pushing the effective rate above 31%. Every transaction above ₹50,000 also gets hit with a 1% TDS — tax deducted at source, meaning the exchange withholds a slice of the trade value upfront and pays it to the tax department before you ever see the money.

That combination has done exactly what critics warned it would. Data from tax-analytics platform KoinX shows more than 70% of Indian crypto trading volume has already shifted to offshore exchanges, where traders dodge the TDS and often get better liquidity. Developers and full-time traders following that money to crypto-friendlier hubs like Dubai and Singapore is a well-documented trend at this point, not a hypothetical one.

What This Actually Means for Indian Users

For the ordinary Indian investor, this isn't an abstract policy debate — it's the reason they're stuck choosing between a heavily taxed domestic exchange and a foreign platform with essentially zero consumer protection if something goes wrong. Offshore trading also means less recourse if a platform freezes withdrawals or turns out to be a front for a scam, and India already has a real problem with crypto wallet-draining schemes that prey on exactly this kind of unregulated, cross-border activity.

Until Parliament produces an actual VDA law — something the committee's own timeline suggests is still months away, pending a government response that hasn't arrived — that trade-off isn't going anywhere. The tax stays high, the legal status stays undefined, and the money keeps quietly moving to platforms outside anyone's jurisdiction. A regulatory vacuum doesn't stop crypto trading in India; it just decides who ends up holding the risk when things go wrong, and right now, that's entirely the individual investor.