India’s Cryptocurrency Regulation: Current Landscape
India’s approach to cryptocurrency regulation is currently characterized by a lack of clear policy direction, often described as being in a “regulatory limbo.” Since the Supreme Court removed the Reserve Bank of India’s banking ban on cryptocurrencies in 2020, lawmakers have largely been guided by older regulations, leading to confusion and uncertainty in the industry.
Proposed Framework for Regulation
Legal expert Arvind Alexander from Hashed Emergent, a firm focused on Web3 investment, argues that to navigate this obfuscation, the country should adopt a framework prioritizing individual rights. He emphasizes the necessity for a “rights-first” approach that supports the self-custody of digital assets while allowing residents to engage in transactions without strict KYC (know your customer) mandates.
Additionally, Alexander advocates for the establishment of a dedicated regulator for the crypto sector, as well as the implementation of innovation-friendly policies such as safe harbors and regulatory sandboxes.
Potential for Regulatory Clarity
According to Alexander, these changes could help reposition India as a competitive player in the global crypto arena, attracting talent and investment by eliminating the current scattershot of regulations and enforcement actions.
In a positive sign for the future of crypto in India, the government is reportedly preparing to release a discussion paper regarding virtual assets, which many stakeholders see as a move toward achieving the regulatory clarity that the industry desperately needs. While Alexander welcomes this discussion paper as a potential milestone, he cautions that its effectiveness will hinge on concrete proposals rather than mere inquiry.
COINS Act 2025: A Step Forward
He argues that to ensure the VDA (virtual digital assets) paper translates into actionable changes rather than becoming a mere instrument for discussion, it should be accompanied by a legislative framework, potentially in the form of a model law developed in collaboration with industry experts. Hashed Emergent has already taken steps in this direction, unveiling the Crypto-Systems Oversight, Innovation, and Strategy (COINS) Act 2025, designed with input from extensive research into the Indian crypto ecosystem.
Addressing Key Issues
Vishal Achanta, a fellow legal counsel at Hashed Emergent, highlights two main issues that motivated the drafting of the COINS Act: a lack of clear rights for users and builders and the confusion stemming from inconsistent regulatory guidance. These issues have resulted in unfavorable conditions that drive talent and capital out of India.
The COINS Act seeks to provide legal clarity, protect consumers, and expedite innovation, positioning India as a hub for decentralized finance that respects individual rights instead of relegating it to a secondary role in international finance. The proposed legislation not only guarantees users the right to manage their crypto assets without compulsory intermediaries but also extends privacy rights to ensure that anonymous transactions are legally protected. Developers, meanwhile, would gain assured rights to create and operate applications on public blockchain networks.
Strategic Bitcoin Reserve
Additionally, the COINS Act introduces the concept of a strategic Bitcoin reserve to decrease India’s dependence on traditional currency and bonds. Although the initial proposal suggests populating this reserve with confiscated bitcoin, Alexander notes that relying solely on forfeited assets may be inadequate for a substantial reserve. To address this concern, the COINS Act outlines a strategy that balances reserve buildup with market stability, advocating for prudent purchasing that fosters asset diversification without compromising fiscal responsibility or market sensibility.
Conclusion
If successfully implemented, these reforms could mark a pivotal shift in India’s stance on cryptocurrencies, fostering a vibrant and responsible digital economy that aligns with global standards.
