Legal Challenges of Blockchain in India

Blockchain Technologies and related virtual digital assets (VDAs) present novel legal, regulatory and policy challenges for India. The first and foremost challenge is regarding who is unified regulator whether it’s Reserve Bank of India, Securities and Exchange Board of India or Ministry of Electronics and Information Technology. The second challenge is that there is legal uncertainty on smart contracts as it’s not explicitly recognized under Indian Contract Act. Consumer Protection, Cross-border transactions and Tax clarity are highly contentious, as there is no dedicated fund for crypto hacks and even when flat taxation exists but accounting for losses and transfers is unclear. This paper maps the existing legal architecture applicable to blockchain and VDAs in India, analyses judicial and regulatory developments, identifies gaps and tensions in the present regime, and proposes targeted legal reforms and regulatory principles. I argue that India’s existing legal instruments (notably the Information Technology Act 2000 and general commercial and criminal statutes), together with case law and tax measures, provide partial coverage but leave substantial uncertainty on issues such as property status of VDAs, consumer protection, anti-money-laundering (AML) combating the financing of terrorism (CFT) enforcement, and financial stability risks. The paper recommends a calibrated approach combining (1) legal clarity on the classification and property status of VDAs, (2) an outcomes-based regulatory sandbox architecture, (3) clearer AML/CFT rules for VDA intermediaries, (4) tax rules aligned with innovation objectives, and (5) a cross-agency coordination mechanism.