India's Crypto Industry Grapples with Accountability and Regulatory Gaps

India's cryptocurrency industry is facing a significant challenge in terms of accountability. In 2024, WazirX was hit by one of India's largest cryptocurrency hacks, resulting in the theft of crypto assets worth around USD 230 million from one of its multisignature wallets.

The hack highlighted a gap in India's legal framework governing cryptocurrencies. Despite the country's efforts to tax and monitor virtual digital assets (VDAs), there is no comprehensive law defining the rights of investors or the duties owed by crypto businesses that hold their assets.

According to Anirudh Rastogi, Founder of Ikigai Law, India still lacks a statutory characterisation of crypto assets outside the Income-tax Act. The Prevention of Money Laundering Act (PMLA) framework provides anti-money laundering compliance requirements but does not prescribe standards for crypto businesses.

This patchwork of laws makes it difficult to address issues such as custody, accountability, and investor protection. Decentralised finance (DeFi), crypto derivatives, and cross-border transactions are some of the most significant unresolved legal issues in India's cryptocurrency landscape.