India’s VDA sector is at a crossroads. The Parliamentary Standing Committee’s new inquiry reflects a consultative and consensus-driven approach, moving past previous policy deadlock. WazirX’s court-sanctioned restructuring in Singapore shows how institutional credibility and legal clarity restore confidence after a crisis.
Indian courts now classify VDAs as property and require exchanges to meet strict fiduciary standards. However, India still lacks the legal infrastructure that enabled WazirX’s swift recovery abroad. The primary challenge is to build integrated regulation that ensures institutional participation and strong user protection, making robust legal reform an urgent priority.
Consultative Regulation for India’s VDA Sector
The Parliamentary Standing Committee on Finance is studying virtual digital assets, reflecting a new consultative regulatory approach for crypto and blockchain. Earlier, regulation relied on scattered judicial interventions and enforcement, with fragmented tax rules and little coherence. Now, structured input from industry, academics, and technologists helps keep rules relevant and prevents policy blind spots that hurt startups and users in this fast-growing asset class.
However, risks remain if consultation is restricted to Delhi based groups and ministries. Technical expertise among policymakers is limited, and coordination among regulators like RBI, SEBI, and tax authorities is challenging. To improve outcomes, crypto stakeholders should push for regional dialogue, share technical guidance, and support comprehensive frameworks for licensing, custody, and insolvency. Proactive engagement is needed to avoid repeated policy paralysis and lost opportunities.
The WazirX Precedent: Lessons for India’s VDA Regulation
WazirX’s $230 million cyberattack in July 2024 catalysed legal reform for virtual digital assets. The exchange restructured in Singapore under court approval by October 2024, achieving 95.7 percent creditor support and resuming operations by November 2025. This 16-month resolution contrasts sharply with India’s NCLT, which has over 15,000 pending cases with typical 3-to-5-year timelines and only 3 percent recovery rates. WazirX projected 52 percent creditor recovery, demonstrating the efficiency of Singapore’s clear institutional framework for digital assets, including statutory property recognition and experienced tech courts.
Meanwhile, Indian courts have established strict fiduciary standards. The Bombay High Court banned asset repurposing without consent, and the Madras High Court classified cryptocurrencies as property while explicitly rejecting cross border loss redistribution schemes. This creates a critical tension: Indian law prioritizes individual asset protection and refuses schemes that dilute investor rights, yet India lacks a structured insolvency regime for exchanges. The result is regulatory arbitrage, with exchanges offshore their crises and India losing control.
For Indian VASPs, the lesson is clear: adopt robust governance including cybersecurity audits, custody segregation with cold storage and multi signature wallets, and pre-arranged restructuring frameworks. Voluntary compliance now prevents forced offshore resolution later.
Integrating Parliamentary and WazirX Narratives: A Regulatory Roadmap
Courts recognize VDAs as property and impose fiduciary duties, yet India lacks critical institutional infrastructure. Missing pieces include a VASP licensing statute, custody standards, fast track insolvency procedures for exchanges, and coordinated regulation across RBI, SEBI, and Finance Ministry.
India should enact four statutory interventions. First, a Digital Asset Service Provider Licensing Act requiring all exchanges to register, undergo governance audits, obtain cybersecurity certification under CERT In standards, and report annually to FIU IND and RBI. Second, a Digital Asset Custody and Segregation Standards Statute codifying statutory duties: client assets held in trust, no rehypothecation without consent, mandatory multi signature cold storage, third party audits, and clear liability for custodial failures. Third, Digital Asset Platform Insolvency Procedures establishing a fast track NCLT pathway targeting 6-to-12-month resolutions with Recovery Token authority and asset preservation protections. Finally, a Joint Directive on VASP Coordination creating monthly inter agency steering meetings, unified registration databases, and unified enforcement across regulators.
Implications for Stakeholders
Law firms and advisors must help clients prepare for changes in the virtual asset regulatory space. Key priorities are briefing clients on the Parliamentary timeline, drafting submission briefs for licensing, custody, and insolvency, and setting up restructuring agreements that highlight risks in choosing Singapore or Indian procedures. Firms should also conduct fiduciary compliance audits based on recent High Court rulings, focusing on asset segregation and permitted asset use.
For Indian exchanges and VASPs, immediate steps include engaging with the Parliamentary Committee to influence standards, implementing independent governance and audits, segregating client assets as per court direction even before laws are formalized, and putting cyber insurance and incident response plans in place. Exchanges should consider their restructuring options early to protect institutional integrity. Investors and users should check exchange registration status, audit reports, and platform terms to ensure assets are not misused or transferred without explicit consent. Diversifying across platforms and staying alert to regulatory changes is essential for managing risk.
Moving from Consultation to Codification
Judicial recognition of VDAs as property and new fiduciary duties, combined with the Parliamentary Committee’s consultative focus, show India is ready for stronger institutional frameworks in digital assets. The real challenge is regulatory speed. Delays risk losing talent to other countries, sending capital overseas, and exposing exchanges to repeated security failures. WazirX’s recovery proved effective legal processes restore market confidence, but India must offer these solutions within its own borders. Immediate action is needed to codify rules on licensing, custody, and insolvency so investors and businesses have the protection and stability to grow.
Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard.
