Author: Shravani Kale, ILS law college
Abstract
India has emerged as one of the foremost cryptocurrency markets globally, with active users anticipated to surpass 100 million this year. However, India lacks a specific regulatory framework for the industry, meaning that while individuals can freely own and trade various cryptocurrencies, these assets are not recognised as legal tender. Despite this, Indian traders have numerous opportunities to engage with the cryptocurrency sector, including the acquisition of other digital assets, such as non-fungible tokens (NFTs). Initially, the Reserve Bank of India (RBI) has been cynical about cryptocurrencies. In April 2018, the RBI prohibited regulated financial institutions from holding or trading crypto assets, presenting significant challenges for exchanges and users alike. Fortunately, in March 2020, the Supreme Court overturned this ruling, declaring the restrictions to be disproportionate in light of the evidence available. Currently, there is no singular governing body overseeing cryptocurrencies in India. However, everal organisations are active in the industry, including the RBI, the Securities Exchange Board of India (SEBI), the Finance Intelligence Unit (FIU), and the Digital Currency Board of India (DCBI). Parliament is now working on a vital bill to provide much-needed clarity. Should this bill pass in its current form, cryptocurrencies like Bitcoin, Ethereum, and Solana will be primarily regulated by SEBI, while NFTs are expected to remain unregulated.
To the point
On 21st July 2025, Hashed Emergent introduced a draft legislation titled the Crypto-Systems Oversight, Innovation, and Strategy (COINS) Bill, 2025, which emerges as one of India’s attempts to create a clear, progressive regulatory framework for digital assets. Drafted by Web3 venture firm Hashed Emergent and policy advisory group Black Dot, the COINS Bill offers a comprehensive model for policymakers aiming to move India from regulatory ambiguity toward being a centre for global crypto innovation in the future. It is a draft bill centred on the concepts of comprehensive regulation of the crypto market, proposing the creation of a specialised regulator, legal protection for non-custodial asset storage, various temporary relief measures, and the establishment of a strategic Bitcoin reserve. The model legislation guarantees “lawful anonymous transfers remain protected” by extending the right to privacy to the cryptocurrency space. According to the model law, developers should have the “explicit right to build, test, and deploy code on public networks.”
Legal Jargon
Vishal Achanta, a legal counsel at Hashed Emergent, explained that this model law was developed following research conducted by the Web3 venture capital firm, which identified two critical aspects of India’s crypto landscape. Firstly, it revealed a lack of clear property and privacy rights for builders and users, while service providers faced conflicting guidance from regulators. Secondly, the country’s punitive taxation policies and arbitrary banking restrictions have compelled many founders and capital to relocate abroad.
The current regulatory environment surrounding cryptocurrency in India is characterised by uncertainty, described as “regulatory limbo.” To address this issue, it is imperative for the country to establish a “rights-first” framework that confers “constitutional-level” rights to residents for self-custody of assets. The COINS Bill is founded on principles of technological neutrality, proportionality, transparency, and the maximisation of individual sovereignty. It mandates public consultations and cost-benefit analyses prior to the enactment of any subordinate legislation, and it safeguards cryptocurrency rights from arbitrary state restrictions without prior approval from the Supreme Court. Notably, a report from the Bank for International Settlements indicates that India emerged as a significant crypto hub in 2024, despite the absence of a transparent regulatory framework for digital assets.
The Proof
According to the COINS Act, participants in the cryptocurrency space have four basic rights: the ability to use non-custodial solutions; the ability to interact with cryptocurrency protocols without the need for middlemen; the ability to create and use creative code; and the ability to remain anonymous and private without having to comply with Know Your Customer (KYC) requirements in Peer-to-Peer and Peer-to-Protocol transactions. Additionally, the COINS Act prohibits punitive taxation on cryptocurrency transactions and permits mandatory user identification solely when engaging with registered service providers. The Crypto Assets Regulatory Authority (CARA), a new regulatory agency, has been recommended under the bill. This entity will consist of three judicial representatives and two technical experts, each possessing a minimum of seven years of experience in the fields of cryptocurrency and digital technologies. The Crypto Assets Regulatory Authority (CARA) will categorise companies based on their risk profiles. Services with custodial functions, such as centralised exchanges, will be subject to strict oversight. Non-custodial, yet insufficiently decentralised protocols will follow minimal disclosure requirements. Protocols that are completely decentralised will not be subject to regulation. The COINS Act further introduces several temporary relief measures, including:
A two-year grace period for compliance with rules applicable to Initial Coin Offerings (ICOs) under a simplified disclosure regime.
An exemption for developers from liability concerning third-party actions, provided there is no malicious intent.
A two-year exclusion from the purview of India’s Foreign Exchange Management Act (FEMA) to eliminate legal uncertainties and facilitate cross-border operations.
Moreover, the bill mandates the establishment, within one year, of two government cryptocurrency reserves. Firstly, the Strategic Bitcoin Reserve, which will serve as the custodian for all state-owned Bitcoin. Secondly, the Strategic Cryptocurrency Reserve, a fund based on decentralised infrastructure crypto-assets.These reserves will be replenished from confiscated assets and other lawful sources and used only by court order or to return assets to victims. An annual public report on the reserves will be published.
Case Laws
Reserve Bank of India v. Internet and Mobile Association of Indian(2020) – In India, this is the most important cryptocurrency case. The Reserve Bank of India (RBI) published a circular in 2018 that forbade banks from doing business with people or companies that were engaged in cryptocurrency. This was contested by the Internet and Mobile Association of India (IMAI), which claimed that the prohibition curtailed the basic freedom to engage in commerce or business. The Supreme Court invalidated the RBI circular in March 2020, ruling that the blanket ban violated Article 19(1)(g) of the Constitution because it was disproportionate and did not pass the test of least intrusive measures to address regulatory concerns, noting that although cryptocurrencies are not legal tender, they are not illegal to trade or hold. In addition to restoring banking access for cryptocurrency companies, the ruling signalled a shift in India’s regulatory strategy and allowed for discussions on how to better govern VDAs in the future.
Shailesh Babulal Bhatt vs State of Gujarat & Anr (2025) – In this case about the claims of bitcoin extortion, the Supreme Court stated that there is an ambiguity in the regulation of bitcoin and cryptocurrencies and that the prevailing regulations are wholly archaic. That is the main reason they can’t deal with this problem, as it is the legislation’s job to make laws regulating this sector.
Umesh Verma vs State (2021): After reviewing cryptocurrency transactions, the Delhi High Court held that all cryptocurrency operations must abide by all relevant Indian laws, such as the Foreign Exchange Management Act (FEMA), the Indian Penal Code (IPC), the Prevention of Money Laundering Act (PMLA), and tax regulations. Cryptocurrency trading platforms need to adhere to AML (Anti-Money Laundering) and KYC (Know Your Customer) regulations. Intermediaries, like as exchanges and platforms, are in charge of tracking down and identifying parties in bitcoin transactions, not the users themselves. The court reaffirmed that legal transactions involving digital assets are safeguarded by the freedom to trade and that, at this time, cryptocurrencies are neither expressly controlled nor prohibited.
Conclusion
The COINS Act offers a balanced solution to the dichotomy of innovation and regulation by presenting a rights-first framework, which prioritises crypto-native rights as constitutional extensions, providing a road-map-like approach to the governance of the new foundational infrastructure. The program will adhere to international standards and draw inspiration from the Singapore regulatory sandbox and the EU Markets in Crypto-Assets Regulation (MiCA).
To have some traction, Hashed Emergent will also co-organise an event with the Bharat Web3 Association to make a contrast between the COINS Act and the discussion paper that the Department of Economic Affairs is coming out with. To promote the ideas of the model law, Black Dot will hold workshops with the major regulators.
It is an approach that authorities throughout India should closely follow since it prioritises user rights, reduces legislative barriers, and proposes innovative solutions like a Bitcoin reserve. In order to convey the model’s principles for more deliberation, Black Dot plans to host workshops with the Reserve Bank of India, Securities and Exchange Board of India, and the Ministry of Finance.
FAQs
Q1: What is the current legal status of cryptocurrencies in India?
Cryptocurrencies are legal to hold, trade, and invest in India, but are not recognised as legal tender. Individuals can own and transact in cryptocurrencies like Bitcoin, Ethereum, and Solana, but these cannot be used as payment for goods or services.
Q2: What was the significance of the Reserve Bank of India (RBI) circular of 2018 and its aftermath?
The RBI circular of 2018 prohibited regulated financial institutions from holding or trading crypto assets, causing challenges for exchanges and users. In March 2020, the Supreme Court overturned this ruling, declaring the restrictions disproportionate and restoring banking access for crypto companies.
Q3: What does the COINS Bill 2025 propose?
The COINS Bill 2025 proposes a comprehensive regulatory framework, including the creation of a specialised regulator called the Crypto Assets Regulatory Authority (CARA), legal protections for non-custodial asset storage, temporary relief for startups, rights for lawful anonymous transfers, and the establishment of strategic Bitcoin and cryptocurrency reserves.
Q4: How does the COINS Bill protect users’ privacy and rights?
The bill requires that developers have the right to create and distribute code on public networks, ensures that legitimate anonymous transfers are protected, extends the right to privacy to the cryptocurrency space, and forbids punitive taxes on cryptocurrency transactions unless they are made through registered service providers.
Q5: What are the temporary relief measures included in the COINS Bill?
The temporary relief measures include a two-year grace period for compliance with Initial Coin Offering (ICO) regulations under a simplified disclosure regime, protection for developers from liability in the absence of malicious intent, and a two-year exemption from India’s Foreign Exchange Management Act (FEMA) for cross-border operations.
