Does India need clearer crypto laws? Industry players look for more clarity from Centre after CoinDCX hack

The world of cryptocurrency hinges on the promise of decentralisation. Yet, what cryptos such as Bitcoin and Ethereum provide is the unofficial promise of deregulation. As Indian authorities walk this tightrope, investor security becomes a major aspect of trading in cryptocurrencies and tokens.

As the world moves toward increased acceptance of crypto and blockchain technology—thanks to the likes of Donald Trump and Elon Musk holding some sway over the Western economy and industry—Indian lawmakers are determined not to be left behind.

Take the case of the latest $44 million hack of Indian crypto exchange CoinDCX. Or the massive $234.9 million WazirX hack a year ago that it even got itself a Wikipedia page—these point to the need for effective laws to be laid out for cryptocurrency, its trade, and regulation, all the while preserving the basic tenets of blockchain technology.

In line with this, the Ministry of Finance is set to publish a discussion paper on Virtual Digital Assets to answer this increasing call to bring new laws to the fore in governing cryptos. However, this means towing the fine line between over-regulation and effective lawmaking.

Industry players introduce draft crypto bill

In an industry first, ahead of the Centre looking to draft new guidelines, Hashed Emergent and Black Dot Public Policy Advisors—two active members in the crypto policy space—have joined forces to publish a model law for crypto in India. They call it the COINS Act 2025.

The Crypto-systems Oversight, Innovation and Strategy (COINS) Act is the Indian industry’s first-ever push for some semblance of law to govern everything crypto. However, what sets it apart is that it moves away from the regulation-centric frameworks—frowned upon in the crypto community—that most policymakers have advocated so far.

MORE | Unwelcome regulations, high taxes push more Indians to offshore crypto exchanges

Borrowing from the US, EU, and Singapore-enacted best practices, Hashed Emergent says that the COINS Act is “intended to be introduced as a stand-alone Act governing all crypto-asset activities in India from a rights-first perspective.”

The team dropped this draft Act on July 21, a day after the CoinDCX breach went public and a week after the first anniversary of the WazirX fiasco. “COINS Act is absolutely relevant, but will not be invoked since the CoinDCX breach reportedly hit only company-held funds and not user‑assets,” said Arvind Alexander, one of the contributors to the COINS Act.

“However, it would be very relevant and valuable in the WazirX hack, which happened exactly one year back, where user assets were compromised,” added Alexander, who serves as a legal counsel for Hashed Emergent.

“The COINS Act envisages a risk‑based custody framework and would mandate robust segregation of user assets, mandatory proof‑of‑reserves disclosures, and enforceable operational standards for centralised exchanges, which will greatly reduce single‑point failure risks when it comes to user assets,” he told THE WEEK.

To explain this, Alexander told us to imagine your crypto holdings as money in a bank vault system. The COINS Act would force exchanges to keep your funds in separate, insured ‘vaults’, and regularly prove on-chain that they actually hold those assets, and follow strict safety playbooks. “That way, even if a company’s own funds are hacked, your crypto stays locked up and protected,” he explained.

Anuradha Chowdhary, the founder and CEO of ZeroTo3 Collective, a law firm focused on new technologies and startups, welcomed the idea.

The COINS Act deals with custody and non-custody assets, which is the need of the hour, she added.

“Regulatory clarity is important in crypto. And there is always confusion about how regulations would apply when a crypto business or a virtual asset service provider has custody of assets versus when they do not have custody of assets,” said Chowdhary.

Traditional regulations that have been around for ages have largely dealt with custody. But financial regulations need to evolve with evolving technology, she stressed.

Custody of assets and crypto exchanges

These regulations affect Indian crypto exchanges the most. THE WEEK spoke to Avinash Sekhar, the CEO of Pi42—a derivatives exchange for crypto in Indian currency. “Theoretically, such regulations are good. But I see some challenges from a regulatory point of view,” said Sekhar, who has been an active industry player since 2017.

“In our exchange (Pi42), we don’t take custody of the customer’s cryptocurrency because we only deal with INR,” Sekhar explained.

However, it is a great idea to have non-custody centralised exchanges with a centralised custodian of crypto assets separately, he added. “It is a very good idea because it reduces the risk from a customer’s point of view. It reduces the risk of hacking. Larger exchanges in the world right now, like Binance, are also moving in this direction.”

But Sekhar admits that this is not easy when it comes to decentralised exchanges.

“A lot of thinking needs to go into it,” he said. “It needs to be explored as to how decentralised exchanges will comply with regulations, especially in the AML (Anti-Money Laundering), KYC (Know Your Customer), and taxation part.”

However, industry players agree on the move to draft new regulations for crypto in the market.

Be it food, aviation, medicine… anything that has an impact on human existence needs regulation, because it is intended to protect consumers. Of course, there will have to be some level of balance between decentralisation and centralisation as far as crypto regulation is concerned, explained ZeroTo3 founder Anuradha Chowdhary.

The COINS Act, drafted by Hashed Emergent and Black Dot Public Policy Advisors, and the upcoming Virtual Digital Assets discussion paper by the Ministry of Finance are a step in the right direction as the industry awaits clearer guidelines on crypto exchanges, taxation, custody, and asset protection and privacy.

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