The blockchain market in India has been rapidly growing, despite facing challenges from the government of India and certain regulators. While there were concerns about the government potentially prohibiting/banning the blockchain market, it is now clear that it is here to stay. 

That said, the blockchain market has been affected by the hack against the cryptocurrency exchange WazirX, which wiped out USD325 million and affected 15 million investors in 2024 – and is currently subject to ongoing litigation. There has also been litigation initiated against the cryptocurrency exchange BitBNS over allegations that users have been unable to withdraw funds from their wallets since a cyber-attack that took place in 2022.

The regulatory framework around the Indian blockchain market is scattered, with certain regulators issuing piecemeal regulations particularly focused on tax and money laundering. However, there has been pressure on Indian banking and securities regulators to formulate an overarching framework to regulate the blockchain market, which will likely set the tone for the market over the next 12–24 months. 

The blockchain market in India today is primarily focused on blockchain-based investments and trading activities. Blockchain technology-based payment is not a major business model, particularly since cryptocurrency is not a widely accepted payment method.

Most popular cryptocurrency exchange platforms in India operate as custodial exchanges and offer a variety of financial products related to cryptocurrencies and other digital assets, such as non-fungible tokens (NFTs). Many cryptocurrency exchange platforms also facilitate person-to-person (P2P) cryptocurrency-fiat transactions, where the cryptocurrency exchange platform serves as an escrow agent in order to hold cryptocurrency in escrow until the purchaser-to-seller fiat transaction can be confirmed. This model of P2P transactions became especially popular in India because, until recently, Indian banks did not support fiat transactions related to cryptocurrency.

Ownership of a digital asset based on a blockchain network is determined solely based on general contract law. India does not have blockchain-specific regulations to determine the finality of the transfer of a digital asset via a blockchain network. Therefore, a digital asset would be considered transferred on the basis of contractually agreed parameters/the blockchain network protocol.

India’s Information Technology Act, 2000 (the “Information Technology Act”) legally recognises the validity of contracts formed through electronic means, stating that:

“Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose”.

Therefore, blockchain-based contracts and transactions will be considered valid under Indian law, provided such contracts/transactions meet general requirements related to valid contracts – ie, offer and acceptance based on free will and lawful consideration and objects.

Indian law currently does not distinguish between digital assets based on a blockchain network. All digital assets on a blockchain network are subject to similar treatment under law, irrespective of their nature. Applicable regulations are not concerned with the nature of the digital asset, instead being primarily focused on income tax, prevention of money laundering and cybersecurity relating to digital assets.

The Securities and Exchange Board of India (SEBI), which regulates publicly traded Indian securities, currently does not have regulations for tokenised securities. Consequently, tokenised securities are not specifically classified or regulated under Indian law. However, SEBI does not permit publicly traded entities to tokenise their listed securities.

Stablecoins are also not specifically regulated under Indian law, and would be treated in the same manner as any other digital asset based on a blockchain network.

NFTs and other digital assets are also treated uniformly under applicable law in India.

Cryptocurrencies are not legal tender in India (other than the central bank digital currency of the Reserve Bank of India (RBI) – ie, fiat Indian rupees issued by the RBI in crypto form on a blockchain network, which will not be covered in this chapter). Legal tender must be accepted by the recipient as consideration to discharge a debt or financial obligation.

However, there is no restriction of the use of cryptocurrencies as consideration in a contract, since the consideration required to conclude a contract need not be cash or other forms of legal tender. That said, since cryptocurrencies are not legal tender, the recipient must agree to accept cryptocurrency as legal tender for the purpose of discharging the payer’s debt or obligation with respect to such contract.

Therefore, in theory, cryptocurrencies can be used to make payments. However, practically, there are challenges in using cryptocurrencies to make payments – particularly in view of the fact that the recipient of the cryptocurrency will be required to deduct 1% of the value of the cryptocurrency and deposit the same with tax authorities in favour of the payer.

There are no legal/regulatory issues relating to the use of digital assets in collateral arrangements in India. However, it is uncommon for banks and non-banking financial companies in India to issue loans secured against digital assets.

Smart contracts – ie, private contractual arrangements made in whole or in part by utilising agreed-upon computer code that executes across multiple “nodes” on a blockchain network – are enforceable under Indian law.

As discussed in the foregoing, the Information Technology Act recognises the validity of contracts formed through electronic means, as long as they are based on an offer and acceptance (involving free consent) with lawful consideration and objects. That said, Indian law requires all contracts to be stamped. Contracts that are not stamped are not admissible before a court of law and, consequently, would not be enforceable. Therefore, it is recommended that applicable stamp duty also be paid on smart contracts.

While there is no restriction on the exposure to digital assets of entities regulated by the RBI, it would be advisable for such entities to refrain from any such exposure in view of the RBI’s negative stance on digital assets. The RBI has reportedly informally instructed its regulated entities to ensure that they do not facilitate transactions involving digital assets.

SEBI-regulated entities (such as mutual funds and alternative investment funds) are currently not permitted to have exposure to digital assets.

There are currently no regulatory sandboxes in India geared towards non-government-driven, blockchain-based projects.

India has implemented the Financial Action Task Force’s Recommendation 16 (Travel Rule) by requiring VDA service providers to register with and report VDA transactions to FIU-IND under the Prevention of Money Laundering Act. The AML & CFT Guidelines for Reporting Entities Providing Services Related to Virtual Digital Assets issued by FIU-IND specifically reference the Travel Rule and state that VDA service providers must ensure they include “required and accurate originator information, and required beneficiary information, on wire transfers and related messages”.

Further, VDA service providers are also required to monitor wire transfers to detect those that lack the required originator and/or beneficiary information, and to screen transactions to ensure compliance with United Nations Security Council Resolution (UNSCR) resolutions.

The information required to be obtained and held relating to such transfers includes:

• the originator’s permanent account number or national identity number;
• the originator’s name;
• the originator’s account number used to process the transaction (ie, their wallet address);
• the originator’s physical (geographical) address, which uniquely identifies the originator with respect to the ordering institution, or their date and place of birth;
• the beneficiary’s name; and
• the beneficiary’s account number used to process the transaction (ie, their wallet address).

India’s central bank, the RBI (which regulates banking and payments) – and the securities regulator, SEBI – have been reluctant to specifically regulate tokens/VDAs based on their nature as currency, securities, etc.

However, in response to a petition filed before the Delhi High Court by users calling for the regulation of VDAs, in January 2025, the Delhi High Court sought responses from the RBI, SEBI and the Ministry of Finance (MoF) for their views on the regulation of VDAs. It is currently unclear whether these regulators and/or the MoF will take a clear stance on VDAs as a result of this petition.

There are no legally recognised self-regulatory bodies in India that perform regulatory or quasi-regulatory roles with respect to businesses or individuals using blockchain in the country.

In 2017, a high-level committee, the Inter-Ministerial Committee (IMC), was constituted to study issues relating to cryptocurrency and to recommend regulatory action. Thereafter, in 2019, the IMC proposed the Banning of Cryptocurrency & Regulation of Official Digital Currency Bill 2019 (the “2019 Crypto Bill”), which sought to prohibit the mining, generation, holding, selling, dealing, issuance, transfer, disposal and use of cryptocurrency in India.

While the 2019 Crypto Bill was never enacted as law, entry 12 of the list of bills to be introduced in Lok Sabha (the Indian lower house of the Indian Parliament), published in the Lok Sabha Bulletin – Part II, dated 29 January 2021, made reference to the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 (the “2021 Crypto Bill”). The purpose of the 2021 Crypto Bill was to “create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses”.

Therefore, while the 2021 Crypto Bill had dropped the word “Banning” from its title, this change was mere form over substance. The principal intent of the 2021 Crypt Bill appeared very similar to that of the 2019 Crypto Bill – ie, to prohibit private cryptocurrencies.

Notably, the 2021 Crypto Bill was expected to be taken up by the Indian Parliament in December 2021. However, the 2021 Crypto Bill has not yet been officially presented before the Indian Parliament, and there have been no further developments in this regard since 2021.

In 2018, the RBI had sought to prohibit its regulated entities (such as banks and payment systems) from facilitating transactions involving cryptocurrencies, resulting in fiat-cryptocurrency transactions grinding to a halt.

The RBI directive was challenged before the Supreme Court of India in the 2020 case of Internet and Mobile Association of India v Reserve Bank of India (AIR 2021 SUPREME COURT 2720), wherein the Supreme Court set aside the RBI prohibition but stated that the government of India is free to pass legislation to prohibit cryptocurrencies.

FIU-IND has undertaken enforcement action against numerous cryptocurrency platforms for their failure to comply with registration and reporting requirements. For example, Binance was fined INR18,82,00,000 (approximately USD2,170,000), and Bybit was fined INR9,27,00,000 (approximately USD1,070,000), for failure to comply with the Prevention of Money Laundering Act. Both platforms are now FIU-IND-registered.

Income on VDAs has been taxed since 2022 at a rate of 30% (plus 4% cess), with no deductions permitted other than the cost of acquisition. Additionally, tax deducted at source at a rate of 1% is chargeable on crypto transactions.

There are no legal ESG/sustainable finance requirements in India that apply to digital assets.

Data protection laws in India (including the incoming Digital Personal Data Protection Act, 2023 – the “DPDP Act”) do not have specific provisions relating to blockchain-based products and services.

While the DPDP Act is primarily consent-based, personal data that has been made publicly available by the data subject (referred to as a “Data Principal” under the DPDP Act) to whom it relates is exempt from the scope of the DPDP Act. Therefore, personal data made available on a blockchain by the data subject to whom it relates (such as public keys) will not be subject to the DPDP Act.