India's Comprehensive Legal Framework Proposes Establishing a Specialized Regulatory Agency, Recognizing Non-Custodial Storage, and Setting Up a Strategic Bitcoin Reserve.
India has published a draft comprehensive legal framework for the cryptocurrency market with the COINS Act, proposing fundamental changes in the approach to digital assets. The bill, co-authored by Hashed Emergent and Black Dot organizations, aims to build a progressive legal framework, including establishing a specialized regulatory agency, recognizing non-custodial storage forms, and setting up a national Bitcoin reserve.
The COINS Act recognizes four fundamental rights for individuals and organizations participating in the crypto asset industry: the right to use non-custodial storage solutions, the right to directly interact with cryptocurrency protocols without intermediaries, the right to deploy source code and technological innovation, and the right to privacy and anonymity in peer-to-peer transactions without mandatory KYC.
The bill prohibits punitive taxation on crypto asset transactions and only allows mandatory identity verification when users interact with registered service providers. This approach demonstrates a balance between protecting individual privacy and the necessary supervisory requirements from regulatory authorities.
The focus of the bill is to propose establishing the Crypto Asset Regulatory Agency with a structure comprising three members with legal backgrounds and two technical experts with at least seven years of experience. This agency will apply a risk level classification system to design appropriate management mechanisms, from strict oversight of custodial services to complete exemption for fully decentralized protocols.
India's Support Mechanism and Strategic Reserve Fund
The COINS Act introduces a series of temporary support measures to promote innovation, including a two-year grace period for regulatory compliance in initial coin offerings with a simplified disclosure regime. The bill also exempts developers from legal responsibility if a third party misuses it, provided there is no intentional harmful conduct.
Specifically, the bill requires the government to establish within one year two state reserves: a Strategic Bitcoin Reserve to store all state-owned BTC and a Strategic Crypto Asset Reserve consisting of assets based on decentralized infrastructure. These two funds will be supplemented from confiscated assets and other legal sources, to be used only by court order or to reimburse victims.
The bill is built on principles of technological neutrality, proportionality, transparency, and maximizing individual autonomy. All sub-legal documents related to crypto assets must undergo public consultation and cost-benefit assessment before issuance. The COINS Act also requires protecting crypto asset access rights from arbitrary state intervention, except with a Supreme Court ruling.
According to a recent report by the International Payment Bank, India has become one of the world's leading crypto asset centers in 2024, despite not having a clear legal framework. The COINS bill is expected to consolidate this position and create a favorable legal environment for the sustainable development of the digital asset industry in India.
