The sitting, held at Parliament House Annexe, brought Binance, WazirX, and ZebPay before the panel alongside India's offshore financial zone regulator, the International Financial Services Centre Authority (IFSCA), and representatives from the Ministry of Finance and the Ministry of Corporate Affairs. The committee's central concern: an estimated 73 to 90 percent of crypto trading by Indian users flows through foreign exchanges, stripping New Delhi of both tax revenue and the ability to protect roughly 120 million investors using offshore platforms.

"Thousands of crores are flowing out of the country through VDA investments. It is very alarming," Mahtab told the sitting, using India's statutory term for virtual digital assets. The committee said it supports maintaining the existing tax framework on all VDA transactions as a revenue-retention measure, though it stopped short of recommending a formal regulatory structure. India counts a crore as ten million units; thousands of crores represents tens of billions of rupees.

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A Tax Regime That Pushed Trading Offshore

India introduced one of the world's steepest crypto tax regimes in 2022. Gains on virtual digital assets are taxed at a flat 30 percent, with an additional 4 percent education cess. A 1 percent tax deducted at source applies to transactions above ₹50,000 per year for specified persons and ₹10,000 per year for all others. Losses from one crypto asset cannot be used to offset gains from another, and only the original cost of purchase qualifies as a deductible expense. The Income Tax Act 2025, effective April 1, 2026, carried this framework forward and added "crypto-asset" to the statutory definition of virtual digital assets.

Critics argue the structure backfired. Chainalysis ranked India first globally in its 2025 Crypto Adoption Index and estimated the country has approximately 119 million crypto users. Yet the committee's own sitting data confirms the bulk of that activity happens on foreign platforms outside Indian law. The contradiction is stark: India holds the top global adoption ranking while simultaneously operating without a regulatory framework, facing a hostile central bank, and running a tax regime that has demonstrably pushed up to 90 percent of trading volume offshore. More than 180 Indian crypto startups have relocated abroad, the panel noted, compounding concerns about long-term capital and talent flight.

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What the Enforcement Picture Looks Like

India's Central Board of Direct Taxes told the committee it had identified roughly 888 crore rupees (approximately $107 million) in undisclosed income connected to crypto transactions and had issued notices to more than 44,000 taxpayers. That enforcement reach expanded further under amendments to the Common Reporting Standard that took effect in March 2026, through which India now exchanges crypto-holdings data with more than 100 countries, giving authorities the cross-border visibility that underpins those notices. Separately, 49 exchanges had registered with India's Financial Intelligence Unit by end-2025, including four offshore platforms. Binance, blocked in India in January 2024 over compliance failures, paid an 18.82 crore rupee penalty and re-registered in August 2024.

All three exchanges called to testify on May 20 also appeared in the Enforcement Directorate's E-Nugget case, in which approximately 90 crore rupees was seized from wallets across the three platforms in connection with an alleged online gaming scam. Total frozen assets in that case reached 163 crore rupees. WazirX carries additional scrutiny after a $230 million security breach in July 2024 led it to restructure through Singapore courts, raising questions about accountability to Indian users. ZebPay, founded in Ahmedabad in 2014 and among India's oldest exchanges, has been flagged in regulatory and cybercrime proceedings in connection with alleged scam-proceeds laundering.

ZebPay and WazirX offered contrasting views to the panel; Binance's remarks to the committee were not publicly reported. ZebPay COO Raj Karkara said compliance measures build trust and bring digital asset reporting closer to traditional finance standards. WazirX founder Nischal Shetty cautioned that the current tax and reporting approach harms liquidity and India's competitiveness. Both positions were reported by BanklessTimes ahead of the May 20 sitting, and it has not been confirmed whether they reflect statements made directly in testimony.

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The RBI Roadblock and the Regional Stakes

Behind the committee's work sits a deeper policy deadlock. The Reserve Bank of India has consistently opposed any framework that would legitimise private virtual assets, citing threats to monetary sovereignty and concerns about dollar-pegged stablecoins undermining UPI (Unified Payments Interface), India's dominant payments network. Mahtab noted directly that "the RBI is opposed to any regulation or any permission for VDA being operated in our country." A government discussion paper on crypto, reportedly in final drafting stages as of mid-2025, was shelved in April 2026 following RBI intervention, representing at least the fifth deferral since 2024. The presence of IFSCA at the sitting may signal that GIFT City in Gujarat is being positioned as a regulatory sandbox, with policymakers exploring a contained offshore zone rather than pursuing a national framework.

The committee said it is studying three global regulatory models: full frameworks as seen in the US, UK, and EU; an outright ban as in China; and containment within existing financial laws as practiced by Japan and Brazil. India currently fits none of these categories.

The stakes extend across South Asia. Pakistan held high-level meetings with Binance in 2025 to explore crypto infrastructure development, including a reportedly discussed Bitcoin national reserve, according to sources cited by regional crypto outlets. Chainalysis identified India, Pakistan, and Vietnam as the three countries driving a 69 percent year-over-year rise in APAC transaction volume, which totalled $2.36 trillion between July 2024 and June 2025. India is the most regulatory-ambiguous of the three. Without a formal framework, the capital and developer talent that Indian users represent will continue flowing to jurisdictions such as the UAE, Singapore, and the EU, all of which have enacted structured licensing regimes in recent years.