India's Digital Asset Sector Seeks Balance Between Regulation and Innovation

India's digital asset sector is navigating uncharted territory due to a lack of comprehensive legislation. Virtual digital assets are recognized for tax purposes but remain undefined under law, leaving businesses and regulators in limbo. The country has taken cues from international bodies such as the Financial Action Task Force (FATF), Financial Stability Board (FSB), and OECD, which have developed common regulatory principles.

Regulatory frameworks in jurisdictions like the European Union, Australia, and the United States serve as models for India's approach. These frameworks ensure legal certainty, incorporate proportionality, and prioritize consumer protection. A self-regulatory organization (SRO) could bridge the gap between current regulations and a comprehensive legislative framework.

By adopting an SRO model, India can establish baseline standards on custody, cybersecurity, listing and delisting protocols, consumer protection, grievance redressal, and law enforcement cooperation. This approach would create a predictable, accountable, and innovation-friendly regulatory environment for the digital asset sector.