How India’s VDA Review May Strengthen Protections Across the Crypto Ecosystem

Why It Matters

A comprehensive VDA law would provide legal certainty, protect retail investors, and reduce systemic risks, positioning India as a competitive yet responsibly regulated crypto hub and potentially reversing capital outflows caused by the current high‑tax, low‑protection regime.

Summary

India, home to over 100 million crypto users, is conducting a formal review of its virtual digital asset (VDA) framework to move beyond a regime focused on a 30% tax and basic AML rules. The review, prompted by the Supreme Court and G20 recommendations, is evaluating a risk‑based VDA law that would introduce licensing for exchanges and custodians, unified investor‑protection standards, clearer custody and insolvency procedures, and specific regulations for stablecoins and tokenized real‑world assets. Proposed safeguards include mandatory segregation of user funds, reserve transparency, enhanced disclosure, and real‑time reporting to multiple regulators. If adopted, the new framework aims to align India’s crypto rules with global norms such as the EU’s MiCA, curb offshore migration, and bolster market integrity while supporting innovation.