“Pending the establishment of a comprehensive legislative framework, the government may consider introducing an interim mechanism through recognised self-regulatory organisations (SROs) operating under the oversight of the designated regulator,” the committee said in its recommendations for the Securities Markets Code.
The committee said such a framework should prescribe minimum standards of governance, transparency, disclosure, investor protection, grievance redressal, compliance with prescribed codes of conduct and appropriate regulatory oversight “so as to mitigate risks arising from the existing regulatory vacuum while promoting market discipline and safeguarding investor interests”. It also noted that although many categories of VDAs are increasingly traded and invested in as financial assets, tradability on organised platforms and price discovery through market forces are not expressly recognised or regulated under the proposed Code.
Citing rapid growth of the VDA ecosystem and increasing retail participation, the committee said the exclusion of such assets from investment schemes creates a “regulatory grey area”. This results in uncertainty, exposing investors to heightened risks of fraud, market manipulation, misrepresentation and inadequate grievance redressal, and creates opportunities for regulatory arbitrage. “Such uncertainty may adversely affect investor confidence and undermine the integrity, transparency and orderly development of the securities market,” it said.
When asked whether the exclusion of VDAs would leave an unregulated grey area, the Finance Ministry said it would depend upon whether the relevant arrangement satisfies the elements of an “investment scheme”. “The extent of the jurisdiction of the Sebi in this area would depend upon the exercise of its regulation-making powers under Clause 32(3) which relate to the conduct, operation and promotion of investment schemes,” it said.
Sebi said VDAs that don’t exhibit the defining characteristics of a “security” or “derivative” under the Securities Contracts (Regulation) Act, 1956 or the proposed Code may remain outside the scope of the definition of “securities”. The panel is also separately preparing a report on the outlook for VDAs that it plans to submit during the monsoon session.
Two-year cooling-off period for Sebi chief on the cards
A parliamentary panel has recommended increasing the cooling-off period for Sebi Chairperson and Whole-time Members from one year to two years before they can take up new employment, to avoid conflicts of interest. The report of the Parliamentary Standing Committee on Finance, which scrutinised The Securities Markets Code 2025, was tabled in Parliament on Thursday. The proposed legislation aims to combine the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956, and the Depositories Act, 1996 into a single code. The Securities Markets Code, 2025, was introduced in Lok Sabha in December 2025.
 "stablecoin, cryptocurrency, crypto")