India Moves Closer to Crypto Regulation as Finance Panel Backs Industry SROs
India’s cryptocurrency industry is inching toward formal regulation after a government-appointed finance panel recommended the establishment of self-regulatory organizations (SROs) to oversee digital asset businesses. The proposal, detailed in a report submitted to the Ministry of Finance in late 2025, suggests that industry-led bodies — rather than a single centralized regulator — would enforce compliance, consumer protection, and anti-money laundering standards.
The panel, chaired by a former finance secretary and comprising officials from the Reserve Bank of India, the Securities and Exchange Board of India, and the Ministry of Electronics and Information Technology, spent over 18 months studying global regulatory models. Its report acknowledges that India’s crypto market, estimated to hold over $15 billion in user assets, requires a tailored approach that balances innovation with investor safety.
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What the SRO Model Would Mean for Crypto Businesses
Under the proposed framework, crypto exchanges, custodians, and wallet providers would be required to join a recognized SRO that sets operational standards, conducts audits, and handles dispute resolution. The SRO would operate under the supervision of a government-designated authority, likely the Ministry of Finance or the RBI, ensuring that industry self-governance does not become self-serving.
The report cites the Financial Action Task Force (FATF) recommendations and models from jurisdictions like Singapore and the United Arab Emirates, where SROs have been integrated into broader regulatory structures. It also draws lessons from India’s own experience with SROs in the securities and insurance sectors.
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Key recommendations include:
- Mandatory membership in an SRO for all virtual asset service providers (VASPs)
- Standardized know-your-customer (KYC) and transaction monitoring protocols
- Regular reporting of suspicious transactions to the Financial Intelligence Unit
- Consumer grievance redressal mechanisms within each SRO
- Capital adequacy and insurance requirements for custodians
Industry Reaction and the Path Forward
The response from India’s crypto sector has been cautiously optimistic. The Blockchain and Crypto Assets Council (BACC), an industry body that has long advocated for regulation, welcomed the panel’s recognition of SROs as a viable framework. “This is a constructive step toward providing legal clarity and operational certainty for businesses that have been operating in a grey area,” said a BACC spokesperson in a statement.
However, some experts caution that the SRO model could face implementation challenges, particularly around enforcement power and funding. “An SRO is only as effective as its ability to sanction members and maintain independence from commercial interests,” noted financial regulatory lawyer Ananya Sharma, who has advised multiple crypto firms on compliance. “The government will need to define clear boundaries and oversight mechanisms.”
The report now awaits review by the Finance Ministry and could be incorporated into a broader digital assets bill that has been under consideration since 2021. India’s previous attempts at crypto legislation — including a proposed ban in 2021 and a tax regime introduced in 2022 — have created a fragmented policy space. The current recommendation signals a more pragmatic, industry-engaged approach.
For Indian investors and businesses, the SRO proposal offers a potential path out of regulatory limbo. If adopted, it could reduce the risk of sudden enforcement actions, improve access to banking services, and attract foreign investment. The next six to twelve months will be critical as the government decides whether to proceed with the SRO framework or pursue alternative regulatory models.
