India’s Crypto Policy Under Scrutiny as Chadha Pushes for VDA Legal Recognition

TheNewsCryptoPublished on 2026-02-10Last updated on 2026-02-10

Abstract

Indian AAP MP Raghav Chadha urged the Indian government to legally recognize Virtual Digital Assets (VDAs) as a formal asset class during a Rajya Sabha address. He highlighted the inconsistency in the current approach where crypto profits are taxed—1% TDS and 30% flat tax—yet lack legal status. This ambiguity has eroded investor confidence, driven an estimated 12 crore Indian investors to offshore platforms, and caused 180 VDA startups to relocate abroad. Chadha noted that 73% of crypto trading volume has moved offshore in FY25, resulting in significant tax revenue loss. He proposed a new licensing law to enhance consumer protection, enforce AML measures, and potentially recover ₹15,000–20,000 crores in annual tax revenue through clear regulation.

AAP MP Raghav Chadha addressed the Rajya Sabha, urging the Indian government to legalise Virtual Digital Assets as a formal asset class. He noted that the government has already started taxing digital assets but has failed to accord them the requisite legal classification. Chadha noted that the tax structure requires investors to pay 1% as TDS and a 30% flat tax on their crypto profits without legal status. Chadha noted that the government needs to move beyond the half-baked system of asset classification.

The MP argued that such an inconsistency erodes investor confidence in digital assets. Chadha said 12 crore Indian investors are forced to use offshore platforms due to unclear laws. He added that 180 VDA startups have relocated operations to crypto-friendly jurisdictions abroad. The MP emphasised that India loses significant tax revenues under the current regulatory trend.

Offshore Trading and Regulatory Challenges

Chadha pointed out that 73% of the trading volume of crypto assets had left the country and gone offshore in the Financial Year 2025. This trend will continue and likely worsen unless authorities implement clear regulations. According to the MP, the current regulatory space is risky and does not encourage investors. The MP noted that other countries, such as Dubai, Singapore, and Malaysia, have attracted Indian investors due to clear regulatory mechanisms. These countries have clear legal frameworks that classify the services of crypto assets.

Chadha pointed out that the lack of a licensing law for India holds the key to comprehensive consumer protection and AML. He said that the ring-fencing approach could lower the risks of money laundering and enhance compliance. Chadha added that the digital trading assets, if brought onboard, could strengthen the domestic market.

Proposed Legislative Framework

Mr Chadha also proposed drafting a new law to enable licensing for digital asset exchanges and related service providers. The law should place investor protection at the center of its mandates and enforce stringent AML measures to bring the grey market into compliance. It will also help India to garner tax revenues of Rs.15,000 to Rs.20,000 crores annually as clarity is created.

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