India Unveils COINS Act to Regulate Cryptocurrency Market

India has put forth a draft bill aimed at comprehensive regulation of the cryptocurrency market, suggesting the establishment of a dedicated regulatory authority, legal safeguards for non-custodial asset storage, various temporary relief provisions, and the formation of a strategic Bitcoin reserve.

Hashed Emergent and Black Dot have introduced the Crypto-systems Oversight, Innovation and Strategy Act (COINS Act), a legislative proposal designed to implement progressive regulations for cryptocurrencies in India.

The COINS Act establishes four essential rights for participants in the cryptocurrency sector, which include:

1. The right to utilize non-custodial solutions.
2. The right to engage with cryptocurrency protocols without intermediaries.
3. The right to develop code and introduce innovations.
4. The right to privacy and anonymity without compulsory KYC in Peer-to-Peer and Peer-to-Protocol transactions.

Additionally, the COINS Act forbids punitive taxation on crypto-asset transactions and permits mandatory user identification solely when dealing with registered service providers.

The legislation also calls for the formation of a new regulatory entity, the Crypto Assets Regulatory Authority (CARA). This authority will consist of three judicial representatives and two technical experts with a minimum of seven years of experience in crypto and digital technologies. The regulator will categorize companies based on their risk levels:

• strict oversight will be enforced on services with custodial functions, such as centralized exchanges;
• minimal disclosure requirements will apply to non-custodial but inadequately decentralized protocols;
• fully decentralized protocols will be exempt from regulation.

The COINS Act outlines several temporary relief measures, including:

• a two-year grace period for compliance with regulations during initial coin offerings (ICOs) under a simplified disclosure framework;
• exemption for developers from liability for third-party actions, provided there is no malicious intent;
• exclusion from the provisions of India’s Foreign Exchange Management Act (FEMA) for two years to eliminate legal ambiguity and facilitate cross-border operations.

The bill also requires the establishment within one year of two government cryptocurrency reserves:

1. Strategic Bitcoin Reserve, which will hold all state-owned BTC.
2. Strategic Crypto-assets Reserve, a fund based on decentralized infrastructure crypto-assets.

These reserves will be funded by confiscated assets and other lawful sources and can only be utilized by court order or to return assets to victims. An annual public report regarding the reserves will be made available.

Max Krupyshev, CEO of CoinsPaid, has previously indicated that in 2025, the interest in Bitcoin as a means to diversify government reserves and lessen reliance on traditional financial assets is expected to increase. He highlighted the growing significance of legal clarity in the regulation of crypto-assets.

The COINS Act is founded on the principles of technological neutrality, proportionality, transparency, and the maximization of individual sovereignty. It mandates public consultations and cost-benefit analyses prior to the enactment of any subordinate legislation and safeguards cryptocurrency rights from arbitrary state restrictions without Supreme Court approval.

As per the Bank for International Settlements report, India emerged as a significant crypto hub in 2024, despite the absence of a clear regulatory framework for digital assets.

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