24 July 2026
On 1 July 2026, the Maharashtra Legislative Assembly introduced The Maharashtra Protection of Interests of Depositors in Financial Establishments Amendment Bill, 2026. Through this amendment, Maharashtra became the first Indian state to expressly include cryptocurrency and virtual digital assets within the scope of a depositor protection law.
The amendment provides a statutory basis for treating crypto assets as recoverable property in cases involving financial fraud and depositor protection proceedings. This is a significant development, especially since a comprehensive central framework for cryptocurrency regulation is still awaited.
This article explains the key changes introduced by the Bill, their legal and regulatory implications, and what they may indicate for the future of cryptocurrency regulation and enforcement in India.
The Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999, commenced on 29 April 1999 and received Presidential assent shortly after. Its purpose was straightforward give the state a fast, effective mechanism to attach and auction the property of entities running fraudulent deposit taking or investment schemes, and distribute the proceeds to defrauded depositors. It has since become one of the primary tools used against Ponzi-style schemes in Maharashtra.
The difficulty was definitional. Section 2(c) of the Act defines “deposit” in terms drawn from a pre-digital financial world – cash, property, and conventional financial instruments. Crypto assets did not fit within that definition, and prosecutors and enforcement agencies were left improvising: attaching bank accounts linked to fraud proceeds, or arguing analogies to “property” under other statutes, without a clean statutory basis for treating a crypto wallet itself as recoverable deposit property. As the explanatory note accompanying the Bill records, the legislature recognised that financial frauds, unauthorised deposit schemes and investor deception are increasingly being carried out through cryptocurrencies and blockchain-based instruments, and that these assets simply were not captured by the existing definition of “deposit” in the Act.
Three features of the amendment are worth flagging for clients operating in or advising on India’s financial and digital asset space:
Crypto as recoverable “deposit” property.
The amendment revises Section 2(c) to bring VDAs and cryptocurrencies squarely within the definition of “deposit”. This is the operative change, it means designated courts under the Act can now order attachment, valuation, and liquidation of crypto holdings connected to a fraudulent scheme in exactly the way they already do for real estate, vehicles, or bank balances. Enforcement no longer has to reason by analogy.
Market-value recovery instead of indefinite freezing.
Perhaps the more commercially significant change is procedural rather than definitional. Historically, seized or attached crypto assets in Indian fraud investigations have tended to sit frozen in wallets for the duration of litigation sometimes years exposed to the full volatility of the underlying market. The amendment allows authorities to value holdings at prevailing market rates and convert them to fiat currency for distribution to victims, rather than waiting on the resolution of proceedings while the asset’s value drifts. This is a meaningful shift in how recovery economics will work in practice, and one that other states and potentially the Centre are likely to watch closely.
A tightened appellate threshold.
The Bill also introduces a stricter procedural safeguard on appeals: a company or entity seeking to challenge a recovery order will reportedly be required to deposit a substantial portion of its assessed liability before the appeal can be filed, reported to be as much as half of the assessed amount. Combined with restrictions on adjournments, the amendment is clearly designed to compress timelines and discourage the kind of prolonged litigation that has historically frustrated depositor recovery.
Beyond the text of the Bill itself, Minister of State for Home Yogesh Kadam has indicated that the state will establish dedicated financial monitoring units at the district level to identify fraudulent schemes proactively, rather than relying solely on post-facto complaints.
This amendment does not arrive in isolation. Maharashtra records the highest volume of reported crypto-related fraud in the country, and cyber-financial fraud complaints in the state now run into the thousands annually. Chief Minister Devendra Fadnavis has paired the legislative change with institutional reinforcement: a proposed Centre of Excellence in Digital Forensics in Pune, and the placement of Maharashtra Cyber directly under the Director General of Police. Read together, the amendment looks less like an isolated legal tweak and more like one component of a coordinated state-level enforcement architecture, legal tools, investigative capacity, and forensic infrastructure moving in the same direction at the same time.
To understand why this amendment carries weight beyond one state’s fraud docket, it helps to place it against the backdrop of where central crypto policy actually stands in mid-2026 and the picture is one of genuine impasse rather than pending clarity.
Crypto trading itself has been lawful in India since the Supreme Court’s 2020 decision in Internet and Mobile Association of India v. Reserve Bank of India, which struck down the RBI’s earlier banking-access ban. But “lawful” has never meant “regulated.” A dedicated crypto bill first flagged for parliamentary introduction back in 2021 was never tabled and has effectively been shelved. The Finance Ministry’s own discussion paper in development since 2023 as a precursor to fuller regulation has now been deferred at least five times, most recently in April 2026, reportedly over continued RBI resistance to any step that could be read as legitimising the asset class. The government’s default posture has instead been regulation-by-taxation: steadily tightening virtual digital asset (VDA) reporting obligations, penalty provisions, and FIU-IND registration requirements, without ever settling the underlying question of what a crypto asset legally is. That unresolved question surfaced pointedly in February 2026, when the Orissa High Court, hearing a dispute over frozen bank accounts linked to crypto activity, asked the central government to state plainly what the legal status of cryptocurrency actually is a question officials reportedly could not answer with confidence in open court. A Parliamentary Standing Committee review of VDA policy is currently expected to report during the monsoon session.
Against that backdrop, Maharashtra’s amendment is significant for three reasons.
First, it confirms that state governments retain real legislative room to address crypto-linked harms through existing statutory frameworks, without waiting on Parliament to resolve the harder, higher-stakes question of how digital assets should be classified and regulated as an asset class. The MPID Act amendment is deliberately narrow it does not touch trading, custody, exchange licensing, or taxation. It simply closes a recovery gap within an existing depositor-protection regime. That narrowness is precisely what makes it achievable, and precisely why we expect other high-fraud-caseload states to look at it as a template.
Second, for financial institutions, exchanges, and platforms with a Maharashtra footprint, the amendment meaningfully raises the practical exposure attached to deposit-taking or investment-scheme structures that touch digital assets. Attachment and liquidation are no longer remedies contingent on a favourable reading of “property” by a sympathetic bench. They are now express, unambiguous statutory powers, paired with a stiffer appellate deposit requirement designed to discourage delay tactics.
Third, and most importantly, the amendment reflects the broader direction of crypto regulation in India. Even without a comprehensive national law, regulatory oversight is steadily increasing through state-level reforms and enforcement measures. The key takeaway for businesses, investors, and advisors is that the absence of a central crypto framework does not mean the absence of legal risk. On the contrary, enforcement powers are expanding, compliance expectations are rising, and regulatory scrutiny of digital assets is becoming more pronounced across jurisdictions.
Maharashtra’s amendment marks a significant step in India’s evolving crypto regulatory landscape. It expressly empowers authorities to trace, attach, value, and liquidate crypto assets linked to fraud for victim recovery, reducing reliance on legal analogies and enforcement improvisation. The broader message is clear: even without a comprehensive national crypto law, legal and compliance risks are expanding through state-level reforms and enforcement measures. For businesses and advisors in the digital asset sector, the absence of central legislation should not be mistaken for an
