No Timeline for Virtual Digital Assets Regulation in India, Says Government 

The Indian government has clarified that there is no anticipated timeline for the introduction of comprehensive regulatory guidelines for the Virtual Digital Assets (VDAs) industry. Addressing the Lok Sabha, the government highlighted the complexities surrounding crypto regulation and the necessity of international collaboration.

India's Current Stance on VDA Regulation

In response to queries from Members of Parliament about steps toward a regulatory framework for VDAs, the government noted that VDAs are borderless by nature, requiring global cooperation to prevent regulatory arbitrage. India maintains that any effective regulatory framework must be developed in alignment with international standards.

VDAs Under Prevention of Money Laundering Act

In March 2023, the government brought Virtual Digital Assets under the purview of the Prevention of Money Laundering Act (PMLA), 2002. This move aims to ensure that transactions involving crypto assets are subject to anti-money laundering measures.

Additionally, income from VDAs is taxed, demonstrating the government’s efforts to regulate this sector within existing frameworks, even in the absence of comprehensive guidelines.

G20 and Global Collaboration

During India’s G20 Presidency, the country supported the adoption of the IMF and Financial Stability Board (FSB) Synthesis Paper and the G20 Roadmap on Crypto Assets. This roadmap outlines a coordinated policy approach addressing the risks associated with VDAs, including those specific to emerging markets and developing economies.

The synthesis paper encourages jurisdictions, including India, to evaluate their unique risks and characteristics while engaging with standard-setting bodies and the G20 to formulate appropriate measures for crypto assets.

No Immediate Timeline for VDA Guidelines

Minister of State for Finance, Pankaj Chaudhary, reiterated that there is no anticipated timeline for comprehensive regulatory guidelines for VDAs in India. The government has been engaging in consultations with industry stakeholders and international organizations to understand the evolving landscape of crypto assets.

However, the government emphasized that the complex nature of VDAs, coupled with their borderless operation, necessitates a collaborative global approach to ensure effective regulation.

Current Regulatory Framework

India’s existing measures for VDAs include:

1. PMLA Inclusion: Bringing crypto transactions under anti-money laundering laws.
2. Taxation of VDAs: Income from VDAs is taxed under current tax laws.
3. International Collaboration: Active engagement with G20, IMF, and FSB for coordinated global policies.

Challenges in Regulating VDAs

The government acknowledged the inherent challenges in regulating VDAs, such as:

• Preventing regulatory arbitrage due to their cross-border nature.
• Addressing risks specific to emerging markets and developing economies (EMDEs).
• Balancing innovation with the need for robust regulatory safeguards.

While the government has taken interim steps like taxation and inclusion under PMLA, a comprehensive framework remains a work in progress. India is expected to align its policies with the G20 roadmap, ensuring that crypto regulations address both local and global risks effectively.

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