India’s government has told a parliamentary finance panel that cryptocurrency should be treated as a high-risk sector, citing concerns around illegal activity, tax compliance, and investor protection. The panel is reviewing the country’s virtual digital asset framework as policymakers assess how the market should be regulated.
In its note to the committee, the government said the crypto ecosystem has been linked to money laundering, offshore transactions, cyber fraud, and other illicit activity. It also flagged difficulties in monitoring cross-border flows and enforcing compliance across platforms and users.
The note said tax data points to a gap between trading activity and reported income. In FY23, 6.45 lakh people were subject to TDS on crypto transactions, but only 1.39 lakh reported that income in their returns.
The Financial Intelligence Unit-India has also stepped up enforcement, with 52 compliance proceedings under anti-money-laundering rules. The government has taken action against offshore exchanges including KuCoin, Binance, Coinbase, and Bybit, according to the note.
The parliamentary panel, chaired by Bhartruhari Mahtab, is still studying global regulatory models before making recommendations. The review comes as the government signals a more cautious approach to virtual digital assets, with tighter oversight now looking more likely than broader market liberalisation.
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