Parliamentary Panel May Push for Stronger Oversight of Crypto, Digital Assets

A parliamentary panel examining virtual digital assets may recommend that the government take steps to strengthen monitoring of cryptocurrency transactions and hold wider consultations on their legal treatment, according to a source familiar with the matter.

The Parliamentary Standing Committee on Finance, headed by BJP MP Bhartruhari Mahtab, has examined various aspects of Virtual Digital Assets (VDAs), the legal term covering cryptocurrencies and non-fungible tokens (NFTs), for more than a year.

The committee has held more than half a dozen meetings and is currently preparing its report for submission to the Speaker of the Lok Sabha, the source said. The panel may recommend stronger monitoring of cryptocurrency transactions and wider consultations on the legal status and treatment of digital assets, the source said.

It is also likely to suggest that the government deploy latest technology for stricter monitoring of digital assets, amid concerns over the challenges posed by their borderless nature.

India does not recognise cryptocurrency as an asset and has not issued directions to regulate such assets in the country. The government has previously told Parliament that crypto assets are inherently borderless and require international cooperation to prevent regulatory arbitrage.

It has also maintained that any legislation aimed at regulating or banning VDAs can be effective only with international collaboration to assess their risks and benefits and develop common taxonomies and standards.

Last month, the Ministry of Finance warned the public that crypto products and NFTs are unregulated and can be highly risky. It cautioned that there may be no regulatory recourse for losses arising from such transactions.

Meanwhile, the Financial Intelligence Unit-India (FIU-IND) recently issued notices to 15 VDA service providers for non-compliance under the Prevention of Money Laundering Act, 2002. VDA service providers were brought under the anti-money laundering and counter-financing of terrorism framework in March 2023.

Cryptocurrency is a digital currency that uses encryption to regulate the generation of units and verify transactions, operating independently of a central bank.