Summary: India’s approach to regulating virtual digital assets (VDA) is evolving from fragmented enforcement towards a structured supervisory framework. This aligns with global trends in the US, UK and EU, of adopting activity-based regimes focused on governance, disclosure, consumer protection and stablecoin oversight. In India, parliamentary consultations, enhanced tax reporting, and increased enforcement actions signal a maturing regulatory outlook. The FIG Paper provides guidance to VDA businesses on navigating India’s current supervisory and enforcement developments whilst preparing for future regulation.
Introduction
The debate around regulation of virtual digital assets (“VDA”) is entering a new phase. Across mature jurisdictions, policymakers have largely moved beyond the question of whether VDA activities should be regulated, to how those activities should be supervised.
In India, while tax reporting obligations and enforcement scrutiny continue to expand, recent developments suggest that India is moving towards a dedicated regulatory framework for VDA businesses.
In this FIG Paper, Part I describes the regulatory standards adopted across major jurisdictions. Part II describes recent Indian policy and enforcement developments. Part III sets out a practical framework for VDA businesses to navigate current legal uncertainty and engage in India’s regulatory design process.
Part I: Convergence of Global Regulations
Recent developments in the United States of America (“US”), the United Kingdom (“UK”) and the European Union (“EU”) reflect a clear trend towards activity-based regulatory frameworks for digital asset businesses.
Joint Statement by the US and the UK
In July 2026, the US Treasury and HM Treasury (UK) endorsed a Joint Statement on Stablecoins covering stablecoins and tokenised financial services. The 10-point statement of commitments by the US-UK Transatlantic Taskforce for Markets of the Future promotes convergence between the two cross-border regimes, with a particular emphasis on requiring payment stablecoins to be fully backed by high-quality liquid assets and supported by clear redemption arrangements for users.
United Kingdom
The UK has finalised its cryptoasset regulatory framework under the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026, with effect from October 25, 2027. The new regime brings exchanges, custodians, intermediaries, staking providers and stablecoin issuers within the Financial Conduct Authority’s regulatory perimeter. Existing registrations will not automatically transition into the new framework; firms must seek fresh authorisations between September 30, 2026, and February 28, 2027.
European Union
Similarly, the EU’s transition period under the Markets in Crypto-Assets Regulation (“MiCA”) has expired. Firms serving EU customers are expected to operate within the MiCA licensing framework. In addition, the European Commission is undertaking a review and public consultation on staking, lending and borrowing of VDAs until mid-2027.
While details vary by jurisdiction, a common regulatory model is emerging. Regulators are distinguishing between categories of VDA businesses, imposing governance and disclosure obligations, requiring consumer protection measures and introducing specific safeguards for stablecoin activities. These principles are also increasingly reflected in jurisdictions such as Hong Kong and Kenya, as reported in our previous FIG Paper.
Part II: India Signals a Shift from Ad-Hoc Enforcement to Supervision
VDA businesses in India primarily operate under taxation and anti-money laundering (“AML”) law, alongside other applicable legislation to exercise enforcement actions. Compliance and enforcement, therefore, occur on an ad-hoc basis. However, recent developments suggest that policymakers are beginning to consider the architecture of a future supervisory framework.
Parliamentary Standing Committee on Finance (“Committee”) Consultation
The Committee has undertaken extensive consultations with various stakeholders, including industry, financial institutions, professional bodies and regulatory authorities, in a study titled “A Study on Virtual Digital Assets (VDAs) and Way Forward” to devise a policy-based VDA regulation for India. In a separate July 2026 report on the Securities Market Code, 2025 by the same Committee, it observed that VDAs remain largely unregulated outside the tax framework. Until a comprehensive law is legislated upon, the Committee recommended an interim mechanism of a self-regulatory organisation (SRO) overseen by a designated regulator, prescribing minimum standards of governance, disclosure, investor protection and grievance redressal. This is the first formal parliamentary endorsement for an institutional VDA framework.
During the former exercise, the Reserve Bank of India (“RBI”) officials briefed the Committee on July 2, 2026, favouring containment and retaining prohibition as a policy option. Per the RBI’s December 2025 Financial Stability Report, the RBI has consistently advocated a cautious approach to VDAs and has reiterated concerns around dilution of monetary control, payment system fragmentation and financial stability risks associated with stablecoin usage.
Current Compliance and Enforcement Efforts
India’s compliance framework is also becoming more demanding. Recent amendments implementing the OECD’s Crypto-Asset Reporting Framework (“CARF”), effective from January 1, 2026, require reporting of crypto-asset transactions and holdings, increasing transparency for both domestic and cross-border activities.
Separately, offshore VDA businesses serving Indian users must continue to assess exposure under the Online Information and Database Access or Retrieval (OIDAR) provisions of India’s Goods and Services Tax (“GST”) framework. The Financial Intelligence Unit of India (“FIU-IND”), India’s AML supervisory authority, and the Directorate General of GST Intelligence (DGGI) are coordinating on enforcement, and VDA businesses must assess whether cross-border services accessed by Indian users necessitate GST registration irrespective of local physical presence.
In June 2026, the Enforcement Directorate, Bangalore (“ED”), initiated investigation into five companies over alleged violations of the Foreign Exchange Management Act, 1999 (“FEMA”), for routing more than INR 2,500 crore (~USD 262 million) abroad through stablecoin transfers. In July 2026, the ED initiated investigation and conducted searches under the Prevention of Money Laundering Act, 2002 (“PMLA”), with respect to an alleged USD 35 million fraud targeting a foreign national.
These enforcement actions demonstrate that authorities are relying on existing statutes, including the FEMA and PMLA, to investigate VDA-related businesses even in the absence of sector-specific legislation.
Part III: The Way Forward for VDA Businesses
For businesses operating in the digital assets sector, India’s current position presents both a challenge and an opportunity.
The challenge is that regulatory uncertainty has not reduced enforcement risk. Authorities are increasingly scrutinising VDA-related activities through anti-money laundering, foreign exchange, tax and consumer protection frameworks.
The expanding reporting ecosystem reinforces this trend. CARF implementation will significantly increase information-sharing between tax authorities, while GST authorities continue to examine digital businesses serving Indian customers from offshore locations.
Registration with the FIU-IND, law enforcement response plans/protocols, tax assessments, dispute resolution mechanisms and consumer-grievance frameworks are essential to reduce legal exposure.
The opportunity lies in the fact that India appears to be entering a policy-design phase. Activity-based regulation and minimum standards relating to governance, capital adequacy, disclosures, safeguarding of customer assets and grievance redressal are increasingly becoming international norms. Businesses that adopt these standards early may find themselves better prepared for future regulatory requirements and more attractive to institutional counterparties.
For VDA businesses, the time is right to stress-test compliance frameworks, assess regulatory vulnerabilities and engage constructively with the current policy process.