India's Parliamentary Standing Committee on Finance held a formal session on Wednesday, May 20, 2026 at Parliament House Annexe in New Delhi to discuss virtual digital assets and the path forward for crypto regulation. According to the official notice from the Lok Sabha Secretariat, the meeting was chaired by BJP MP Bhartruhari Mahtab and focused on 'A Study on Virtual Digital Assets (VDAs) and Way Forward'. The first session from 11:00 a.m. to 12:30 p.m. included representatives from ZebPay, Binance, and WazirX, followed by separate discussions with the International Financial Services Centres Authority (IFSCA) and government ministries. This marks a significant shift as India still lacks a comprehensive crypto law, with exchanges currently operating through Financial Intelligence Unit (FIU-IND) registration requirements rather than a dedicated crypto licensing framework. The committee has not yet published its findings or recommendations from the sessions, with further sittings expected as the consultation process continues.
The most pointed concern surrounding Wednesday's session was the presence of WazirX at the table, given the exchange's troubled history with a 2024 security breach that resulted in the loss of approximately $230 million in user funds. Hundreds of thousands of Indian retail investors have been in restructuring proceedings since then, waiting to learn what fraction of their savings they will recover. A public dispute between WazirX and Binance over ownership and responsibility during the crisis left users frozen out while the two companies argued about liability in public. Despite these challenges, WazirX participated in Wednesday's parliamentary discussions on how to design rules that would protect Indian retail crypto investors going forward, demonstrating the government's commitment to formalizing regulation despite past incidents.
A significant regulatory gap has emerged in India's digital asset market as major crypto exchanges implement varying withdrawal policies. According to reports from The Economic Times, large Indian crypto exchanges either bar or actively discourage user withdrawals, citing fears of money laundering misuse and foreign exchange regulation violations. However, Binance, the world's largest crypto exchange by trading volume with 5-10 crore users in India, takes a different approach, permitting free withdrawals up to ₹64 crore ($8 million). The withdrawal policy differences create practical implications for crypto users and service providers, with users able to transfer cryptos through peer-to-peer platforms and banks, though exchanges typically monitor external wallet transfers, raising concerns about circumventing rules such as the ₹20 lakh annual overseas remittance cap.
India's complex crypto regulatory landscape has evolved significantly since the 2022 introduction of a 30% flat tax on crypto profits and 1% tax deducted at source (TDS) on transactions. As reported by multiple sources, these harsh tax measures triggered a sharp drop in domestic trading activity as users moved to offshore platforms. By 2023, India brought crypto exchanges and wallet providers under anti-money laundering rules through the Prevention of Money Laundering Act (PMLA), requiring all virtual asset service providers (VASPs) to register with FIU-IND, implement KYC systems, and report suspicious transactions. The current regulatory framework addresses money laundering risks while maintaining the ₹20 lakh annual overseas remittance cap, though areas like DeFi, stablecoins, and NFTs remain unclear with limited detailed rules on custody, investor protection, and cross-border flows.
Legal experts and industry professionals are advocating for regulatory clarity to address the current uncertainty. Harshal Bhuta from P. R. Bhuta & Co suggested the need for either a dedicated legislative framework governing cross-border transfers or for RBI to recognize cryptos as 'currency' under FEMA. Sudhakar Lakshmanaraja from Digital South Trust emphasized the need for uniform guidelines on withdrawal limits, disclosures, user protection, and product-wise taxation. The debate highlights the broader regulatory challenges facing India's digital asset market, where any regulation on withdrawals must strike a careful balance between mitigating misuse and preserving users' right to self-custody. The upcoming committee discussions are viewed as potentially the clearest sign yet that India may finally be ready to move from uncertainty toward a more structured crypto framework.
