Crypto Regulation Hinges on Accountability
India's crypto market has faced significant challenges in recent years, particularly after one of its largest cryptocurrency hacks occurred in 2024. WazirX was hit by a major hack resulting in the theft of around $230 million worth of cryptocurrency assets from one of its multisignature wallets.
The incident highlighted a critical issue: if a crypto exchange loses customer assets, who is legally responsible? This question remains unanswered under Indian law, despite the country's efforts to tax and monitor virtual digital assets (VDAs).
Anirudh Rastogi, Founder of Ikigai Law, notes that India still lacks a statutory characterisation of crypto assets outside the Income-tax Act. He also points out that there is no dedicated market regulator or legal framework prescribing standards for crypto businesses.
The Prevention of Money Laundering Act (PMLA) framework provides compliance requirements for anti-money laundering purposes but does not address issues like asset safeguarding, segregation, capital requirements, or proof of reserves. This gap has been exposed in the WazirX case and others, where litigation highlighted the difficulties in resolving disputes under an underdeveloped legal framework.