04 June 2026
India’s digital asset landscape is undergoing a quiet but consequential transformation. Without any omnibus crypto legislation in force, the country’s courts, regulators, and lawmakers are independently constructing a framework piece by piece that is beginning to resemble something coherent. This edition covers the most significant developments from late 2024 through mid-2026: a landmark property ruling that redraws investor rights, a Supreme Court call for urgent legislation, sweeping AML reform, a new tokenisation bill, expanded tax definitions, and SEBI’s entry into crypto oversight.
I. JUDICIARY
Rhutikumari v. Zanmai Labs Pvt. Ltd. | Madras High Court | October 25, 2025
In the most consequential crypto ruling an Indian court has yet delivered, Justice N. Anand Venkatesh held that cryptocurrency constitutes property under Indian law not currency, not a speculative instrument, but a form of intangible asset capable of being owned, possessed, transferred, and held in trust.
How the dispute arose
In July 2024, the WazirX exchange suffered a targeted cyberattack on certain cold wallets holding ERC-20 tokens worth over USD 230 million. In the aftermath, Zanmai Labs WazirX’s Indian operating entity froze all user accounts across the board. Its Singapore parent, Zettai Pte Ltd, separately initiated restructuring proceedings before the Singapore High Court and proposed a “rebalancing” scheme that would spread the losses across the entire user base, including users whose holdings had no connection to the compromised wallets.
The petitioner held 3,532 XRP coins entirely untouched by the breach. She approached the Madras High Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking an injunction to prevent Zanmai and its directors from diminishing or reallocating her specific holding. Zanmai pushed back on two fronts: first, that it was merely a rupee-to-crypto transaction facilitator, with the actual wallets controlled by Binance and later Zettai; second,
that the Singapore court’s approval of the restructuring scheme should displace Indian jurisdiction entirely.
The court’s findings
On jurisdiction, the court ruled that assets stored or accessible in India constitute assets situated in India, regardless of the technical architecture of the wallet infrastructure. A Singapore-approved scheme does not override the Indian court’s protective jurisdiction over Indian residents and India-facing entities.
On the substantive question, the court reasoned through each attribute of property and found that cryptocurrency satisfies all of them. It noted that Indian law had already implicitly acknowledged this through the treatment of virtual digital assets under Section 2(47A) of the Income Tax Act, 1961, confirming that the legislature had long moved beyond treating crypto as purely speculative.
The court characterised Zanmai as more than a neutral facilitator and observed that it performed a custodial role in relation to customer assets. When a user deposits assets with an exchange, the exchange assumes responsibilities similar to those of a trustee. Freezing an account does not remove the obligation to preserve the underlying assets, and the custodian remains responsible for safeguarding them. A similar view was taken by the Bombay High Court in a decision delivered on 7 October 2025, which also recognised the fiduciary nature of the relationship between crypto exchanges and their users.
Relief granted
The court directed preservation of the petitioner’s XRP holdings and required Zanmai to deposit ₹9.56 lakh into escrow pending resolution through arbitration. It also issued institutional guidance, calling on Web3 platforms to maintain segregated client-fund accounts, conduct independent audits, and strengthen KYC and AML controls.
Alignment with global jurisprudence
The Madras court drew on a body of comparative case law that has been steadily converging on the same conclusion. The UK High Court recognised Bitcoin as property and granted proprietary protection in a landmark 2019 decision. The Singapore High Court held in a 2023 ruling that digital tokens can be defined, identified, and transferred like any other class of property. The Hong Kong Court of First Instance ruled in a 2023 decision that cryptocurrency can form the subject matter of a trust, and New Zealand’s High Court reached the same view in a 2020 judgment. India has now joined this international consensus.
What changes in practice
The implications extend well beyond this single dispute. Investors may now seek proprietary injunctions and asset recovery remedies not merely damages or claims under the Specific Relief Act, 1963 which means value erosion can be challenged directly. Property status also provides insulation from exchange insolvency: under Section 36 of the Insolvency and Bankruptcy Code, 2016, assets held in trust are excluded from the insolvent estate, shielding holders from being treated as unsecured creditors. Additionally, digital assets may now qualify as “goods” under the Consumer Protection Act, 2019, opening a second avenue of redress for retail investors. Finally, the recognition of custodial obligations creates a foundation for digital assets to be used in secured lending, pledge, hypothecation, and collateral arrangements a significant step toward institutional finance structures.
Shailesh Babulal Bhatt v. State of Gujarat | Supreme Court | May 19, 2025
A three-judge bench comprising Justices Surya Kant, Dipankar Datta, and Vijay Bishnoi, while hearing a Bitcoin fraud matter involving a Gujarat-based accused, issued a pointed observation that India’s statutory framework is wholly inadequate for the realities of cryptocurrency and that the unaddressed regulatory vacuum has become a breeding ground for financial misconduct. The bench characterised crypto loosely as a sophisticated form of hawala and directed the central government to move without delay toward a clear legislative structure.
This is not the Supreme Court’s first signal on the subject. In a landmark 2020 judgment concerning the RBI’s 2018 banking restrictions on crypto related services, the court struck down the measures as disproportionate. The 2025 observation sharpens the urgency considerably. Until dedicated legislation is enacted, fraud and money laundering cases involving digital assets will continue to be prosecuted under the Indian Penal Code, the Prevention of Money Laundering Act, and the Information Technology Act, 2000, a patchwork framework that the court has now publicly described as insufficient.
II. REGULATORY DEVELOPMENTS
FIU-IND Updated Guidelines | January 8, 2026
The Financial Intelligence Unit India issued a comprehensive revision of its anti-money laundering and counter-terrorism financing guidelines for Virtual Digital Asset service providers on 8 January 2026. The update supersedes earlier iterations from March 2023 and January 2025 and constitutes the current operative compliance framework under the Prevention of Money Laundering Act, 2002.
The revised guidelines require full KYC verification tied to PAN or Aadhaar, adherence to the FATF Travel Rule requiring disclosure of sender and recipient details on transfers, timely filing of Suspicious Transaction Reports, prescribed record retention periods, and active cooperation with enforcement authorities. Critically, the registration obligation turns on activity, not geography — offshore platforms servicing Indian users are squarely within scope.
Non-registration carries serious consequences under Section 13 of the PMLA, including financial penalties and the possibility of platform blocking through the Ministry of Electronics and Information Technology. These are not theoretical risks: FIU-IND penalised Binance in June 2024 for operating in India without registration, and in January 2025 ordered Bybit to pay 9.27 crore in penalties. The Directorate General of GST Intelligence separately issued Binance a show-cause notice in August 2024 alleging unpaid GST of ₹722.43 crore — illustrating that non-compliant offshore operators face exposure across multiple regulatory agencies simultaneously.
SEBI Circular on VDA Classification | Effective April 1, 2025
From 1 April 2025, the Securities and Exchange Board of India assumed supervisory authority over crypto tokens that functionally resemble securities specifically those that confer voting rights, distribute dividends, or generate returns tied to the efforts of a third party. This creates a two-tier regulatory structure: broadly commodity-like tokens such as Bitcoin and Ether remain within the FIU-IND and CBDT framework, while tokens issued through initial coin offerings or security token offerings that carry profit-sharing or governance features now attract the full weight of SEBI oversight, including prospectus requirements, listing obligations, and investor protection norms.
A notable asymmetry remains: SEBI currently does not permit mutual funds or registered Alternative Investment Funds to hold virtual digital assets. Institutional participation therefore continues to face structural constraints even as the oversight architecture expands.
III. LEGISLATIVE DEVELOPMENTS
Income Tax Act, 1961, Section 2(47A) | Effective April 1, 2026
The Finance Act, 2025 inserted a new sub-clause (d) into Section 2(47A) of the Income Tax Act, 1961, extending the statutory definition of Virtual Digital Asset to cover any digital representation of value that relies on a cryptographically secured distributed ledger or comparable technology to validate and secure transactions. The amendment, effective from 1 April 2026, operates independently of the earlier sub-clauses and is explicitly designed to capture instruments not previously within the definition’s scope.
The practical target is tokenised real-world assets, DeFi protocol tokens, and novel blockchain instruments that have emerged since the original definition was drafted. The tax treatment itself remains unchanged: a flat 30% rate under Section 115BBH, 1% tax deduction at source under Section 194S, and no facility to offset losses across different virtual digital asset transactions. Entities issuing or dealing in newly covered instruments should revisit their withholding and reporting obligations urgently.
Asset Tokenisation (Regulation) Bill, 2026 | Rajya Sabha | March 14, 2026
Member of Parliament Raghav Chadha introduced India’s first purpose-built legislative proposal for blockchain-based real-world asset tokenisation in the Rajya Sabha on 14 March 2026. The 27-section draft statute addresses the full operational lifecycle of tokenised assets: issuance conditions, offering document standards, custody requirements, platform registration, settlement obligations, investor safeguards, and a penalty regime carrying up to ten years’ imprisonment for serious violations.
Two structural gaps deserve close attention. First, the Bill does not contain a harmonisation clause linking it to the PMLA’s VDA framework. Any platform operating under the Bill that simultaneously provides exchange, transfer, or custody services will independently qualify as a VDA Service Provider under the PMLA and must obtain separate FIU-IND registration. Second, the Bill leaves unresolved the treatment of fully decentralised protocols, a question the European Union’s Markets in Crypto-Assets Regulation directly addressed by carving out non-custodial arrangements from its scope.
India is entering this space later than several comparable jurisdictions. MiCA entered full force in December 2024, and Dubai’s Virtual Assets Regulatory Authority updated its real-world asset rulebook in May 2025. Platforms building tokenisation infrastructure should plan for dual compliance under both the proposed Bill and existing PMLA obligations from the outset.
IV. GOVERNMENT INITIATIVE
7. MeitY Launches Blockchain India Challenge 2026
Ministry of Electronics and Information Technology | 2026
Early 2026 saw the Ministry of Electronics and Information Technology announce the Blockchain India Challenge, a government-backed programme directing early-stage support toward startups developing distributed ledger applications for public-sector use cases including land registry, supply chain traceability, and digital identity systems. The initiative operates under the Information Technology Act, 2000 and offers participating startups both funding access and direct regulatory engagement pathways.
The programme reflects a deliberate bifurcation in government policy: the underlying technology is actively encouraged, while comprehensive regulation of private crypto tokens remains unfinished business. For enterprise and permissioned blockchain developers, this represents a concrete near-term opportunity.
