Lok Sabha Question No. 3418 (UNSTARRED), answered on 2024-12-16
Subject: Virtual Digital Assets (VDA) Regulation
Ministry: FINANCE
Asked by: Shri Appalanaidu Kalisetti, Shri Lavu Sri Krishna Devarayalu

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 3418

TO BE ANSWERED ON 16.12.2024/ Agrahayana 25, 1946 (Saka)

## Virtual Digital Assets (VDA) Regulation

3418. Shri Appalanaidu Kalisetti: Shri Lavu Sri Krishna Devarayalu:

Will the Minister of FINANCE be pleased to state:

(a)  whether  the  Government  is  taking  steps  to  establish  a  comprehensive  regulatory framework for the Virtual Digital Assets (VDA) industry in the country and if so, the details thereof;

(b) whether the Government is preparing a Discussion Paper to outline its stance on Virtual Digital Asset (VDA) regulation;

(c)  if  so,  the  current  status  of  the  said  Discussion  Paper  and  the  expected  timeline  for  its release;

(d) the details of the specific measures being considered to balance innovation and investor protection in the VDA industry;

(e) whether the Government has conducted consultations with stakeholders in the VDA sector to address regulatory challenges, and if so, the number of consultations held classified, yearwise; and

(f) the details of the timeline anticipated for the introduction of regulatory guidelines for the VDA industry in the country?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a) to (f): Virtual  Digital  Assets  (VDAs)  are  by  definition  borderless  and  require international  collaboration  to  prevent  regulatory  arbitrage.  Therefore,  any  comprehensive regulatory  framework  on  the  subject  can  be  effective  only  with  significant  international collaboration  on  evaluation  of  the  risks  and  benefits  and  evaluation  of  common  taxonomy and standards. Notwithstanding that, government vide notification dated 7 th March, 2023 has brought VDAs under the purview of the Prevention of Money Laundering Act, 2002 (PMLA) to bring the transactions involving VDAs within the ambit of PMLA. Further, Income from these assets is taxed under the Income-tax Act, 1961 and different aspects of the VDA sector are  regulated  under  the  Information  Technology  Act,  2000,  and  the  Companies  Act,  2013. Further,  during  India's  Presidency  of  the  G20  last  year,  the  International  Monetary  Fund (IMF) and Financial Stability Board (FSB) Synthesis Paper, along with the 'G20 Roadmap on

Crypto Assets,' was adopted. This Synthesis Paper provides a coordinated and comprehensive policy and regulatory framework for crypto assets, addressing the full range of risks, including those specific to emerging markets and developing economies (EMDEs). All jurisdictions, including India, are expected to evaluate their country-specific characteristics and risks, and engage with standard-setting bodies and the G20  to appropriately  consider  any  necessary  measures  for  crypto  assets.  A  part  of  such  a  process may involve the publication of a Discussion Paper to obtain feedback on the stance or various stances under consideration by jurisdictions. However, there is no specific timeline for any step  in  the  process,  including  the  publication  of  the  Discussion  Paper,  as  it  may  only  be published after such stance or stances are determined based on the evaluated risks. Further, the  need  to  balance  investor  protection  and  innovation  must  be  assessed  in  light  of  the broader objective of protecting the Indian economy from the risks posed by the VDA sector while maintaining the financial and monetary stability of the economy. Moreover, due to the cross-border and digital nature of this sector, investor protection measures can only mitigate certain risks to a limited extent and cannot entirely eliminate them. Further, government has undertaken formal and informal consultation with stakeholders including industry and with relevant international organizations from time to time on policy formulation of crypto assets. There  is,  however,  no  timeline  anticipated  for  introduction  of  comprehensive  regulatory guidelines for VDA industry in India.

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