India’s ongoing regulatory ambiguity around digital assets has started pushing Web3 startups out of the country, prompting a formal warning in the Rajya Sabha on Tuesday. Raising a Special Mention, BJP MP Dr. K. Laxman said India is witnessing a “growing innovation drain” as young blockchain companies increasingly shift their operations or headquarters to regions like Dubai and Singapore.

According to Dr. Laxman, this movement has accelerated in recent months and represents a serious threat to India’s position in emerging technologies.

• Key Concerns Raised
• Impact on India’s Tech Sector
• Why Startups Are Leaving
• What the Government Has Been Urged To Do

India has one of the world’s largest pools of blockchain developers, but the absence of a defined regulatory framework is prompting founders to incorporate overseas. Many companies continue to employ Indian talent, but relocate corporate entities to jurisdictions that offer clarity on digital-asset rules, compliance standards and licensing.

Dr. Laxman told Parliament that this shift is no longer isolated and must be treated as a structural challenge.

During Special Mention in Rajya Sabha today, I raised the growing concern of innovation drain in Indian Web3 startups caused by regulatory uncertainty. pic.twitter.com/THS6gRM5c9— Dr K Laxman (@drlaxmanbjp) December 8, 2025

Key Concerns Raised

The MP said Web3 entrepreneurs are struggling to navigate unclear compliance requirements, fragmented oversight, and the absence of a single policy framework governing blockchain-based business models. He highlighted four specific problem areas:

• No defined compliance norms for digital-asset businesses
• Lack of registration or licensing pathways
• No dedicated consumer-protection framework for Web3 users
• No innovation-governance structure for emerging technologies.

These gaps, he argued, have created hesitation among investors and uncertainty for founders planning long-term operations in India.

Impact on India’s Tech Sector

Industry groups describe the shift as an “innovation drain,” warning that India risks losing high-value intellectual property, early-stage entrepreneurship and global competitiveness if the trend continues. Dr. Laxman echoed these concerns, noting that several “high potential enterprises” have already moved their headquarters abroad.

He said the situation could hurt India’s ambitions of building a resilient digital economy and weaken its position in rapidly developing global Web3 markets.