A Parliamentary Standing Committee has recommended establishing a Self-Regulatory Organisation (SRO) as an interim mechanism to govern cryptocurrencies in India until formal legislation is enacted. The SRO would function under RBI and SEBI oversight, focusing on investor protection, KYC norms, and anti-money laundering compliance. The committee stressed that crypto assets need regulatory clarity without stifling innovation, proposing a phased approach bridging the current regulatory vacuum and future statutory framework.

India's cryptocurrency sector has operated in a legal grey zone since the Supreme Court lifted RBI's banking ban in 2020 (Internet and Mobile Association of India v. RBI). Despite imposing a 30% flat tax on crypto gains and 1% TDS from 2022, India lacks a dedicated crypto law. The Parliamentary Standing Committee's SRO recommendation is significant for several reasons. First, it acknowledges the reality of millions of Indian retail investors in crypto without a safety net. Second, it mirrors the approach used in fintech and microfinance sectors, where SROs preceded formal regulation. Third, placing the SRO under dual oversight of RBI (for payment/currency aspects) and SEBI (for investment/securities aspects) reflects the unresolved classification question — is crypto a currency, commodity, or security? The committee's push for investor protection aligns with global trends: the EU's MiCA framework, the US SEC's enforcement actions, and IMF's warnings about crypto's macroeconomic risks. For India, the concern is capital flight, foreign exchange volatility, and retail investor losses. The SRO model would require crypto exchanges to self-police on KYC, AML, and disclosure norms while formal legislation catches up — a pragmatic interim solution given Parliament's legislative backlog on the Cryptocurrency and Regulation of Official Digital Currency Bill.