A “Regulate, Not Ban” Stance on Crypto Newly Emerges from India’s Parliament

India’s Parliamentary Standing Committee on Home Affairs has recommended that cryptocurrencies be regulated under a clear legal framework rather than being outlawed. This recommendation comes even as the committee’s own report detailed the alarming role of digital currencies in fraud, money laundering, and organized crime.

The panel’s 254th report, which focuses on cybercrime, suggests that crypto should be formally recognized as “digital assets” under the Foreign Exchange Management Act (FEMA). This move would subject the entire industry to strict government oversight, including anti-money laundering (AML) and know-your-customer (KYC) norms.

Sobering Take at Crypto-Fueled Crime

The report paints a grim picture, cataloging a wide range of cybercrimes enabled by crypto. These included cryptojacking, Ponzi-style trading apps, ransomware payments, and the use of tokens on the dark web for drugs, weapons, and child exploitation.

Investigators from the Ministry of Home Affairs and the Central Bureau of Investigation also warned of laundering networks, where mule bank accounts and crypto wallets are layered through shell companies, peer-to-peer transfers, and even gold purchases. Additionally, scams such as “digital arrests,” human trafficking, and fake job rackets have exploited cryptocurrencies for extortion and fraud.

The scale of the problem is staggering. The committee noted that between 2019 and 2024, over 5.3 million cybercrime complaints were filed, with 85% being financial frauds, many linked to crypto. The total losses reported in that period crossed ₹31,500 crore (approximately $3.8 billion).

This sober reality shows the urgent need for clarity, separating the legitimate Crypto Adoption in India from the Social Media Hype.

Regulation as a Necessary Evil

Despite these findings, the committee concluded that a blanket ban would be ineffective. Instead, it urged that crypto exchanges be licensed and held to the same global standards as those under the Financial Action Task Force (FATF). The report also called for clear taxation rules, noting that the current 30% tax and 1% TDS operate in a legal vacuum.

This pragmatic approach could see major changes for the industry, which has seen some companies like the India-listed Jetking Approve a Private Placement to Expand its Bitcoin Strategy even in the absence of clear rules.

The committee also acknowledged the potential of stablecoins but stressed that only the Reserve Bank of India should authorize any INR-pegged versions under tight scrutiny.