The passage of the GENIUS Act in the United States, the first federal crypto legislation of its kind, has drawn attention globally, including in India. Unlike El Salvador’s 2021 move to adopt Bitcoin as legal tender, this is a far more consequential development. The American Act introduces formal oversight for stablecoins, a type of cryptocurrency whose value is pegged to stable assets like the US dollar. It requires stablecoins to be backed one-to-one by safe assets such as US dollars, and brings issuers under formal oversight. Viewed narrowly, it may appear to be a long-overdue regulatory step for the US. But strategically, it reinforces American monetary influence through digital proxies at a time when many economies are exploring alternatives to the US dollar and the traditional payment systems.
However, for Indian crypto investors, the significance of this development remains largely external. It does not resolve the long-standing risks, vulnerabilities, and policy ambiguities that continue to characterise the Indian crypto ecosystem. If anything, the contrast is now starker. While Washington has codified protections around certain digital assets, India has refrained from institutionalising crypto, not due to regulatory weakness, but due to legitimate concerns over stability, misuse, and limited economic value.
Repeated breaches
Cryptocurrencies first emerged in 2009 with the launch of Bitcoin, introduced as a decentralised digital alternative to traditional money. Today, there are hundreds of crypto currencies with a combined market value nearing $4 trillion. Bitcoin, the most popular cryptocurrency in the world, on July 14 crossed a lifetime high of $120,000. But any celebratory sentiment in India has been short-lived.
Crypto exchange platform CoinDCX disclosed that on July 19 a server-side vulnerability led to a loss of $44 million (approximately ₹378 crore). The attack targeted an internal operational account used for liquidity provisioning. According to reports, an ethical hacker ZachXBT identified the breach nearly 17 hours before CoinDCX publicly confirmed it. Although the company stated that customer funds were unaffected and that losses would be absorbed through its treasury, the episode again highlights the absence of any statutory framework, the unregulated nature of communication and lack of structured disclosures in the crypto world.
In the past 12 months, CoinDCX is one of two major platforms to report significant breaches. In July 2024, WazirX, at the time India’s largest crypto exchange, was hit by what remains the country’s biggest crypto-related cyberattack. Assets worth ₹2,000 crore were lost. Investigations suggested links to North Korea–affiliated entities, but no formal regulatory penalties or investor compensation followed. In both instances, there was no public audit requirement, no government-led inquiry with enforceable outcomes, and no insurance-backed restitution process.
India currently has an estimated 20 million crypto users and reportedly about 30-50% of the trading volumes in various platforms are contributed by rich investors. These figures, while reflective of Indian investor interest, are not matched by a commensurate institutional or legal framework. The sector remains largely self-governed, with exchanges operating without formal licences, solvency disclosures, or independent audit requirements.
Rightly cautious
The regulatory stance of Indian authorities remains appropriately measured. Former RBI Governor Shaktikanta Das had reiterated concerns about the destabilising potential of cryptocurrencies. The RBI still maintains its stance that private crypto assets pose risks to financial stability and monetary policy transmission.
The Indian central bank’s preferred digital alternative remains the e-rupee, India’s Central Bank Digital Currency (CBDC) which was first introduced in November 2022. It is backed by sovereign guarantee, issued by the RBI, and integrated with existing payment infrastructure. While still in its early stages, the e-rupee in circulation has grown to over ₹1,000 crore and represents a deliberate, regulated approach in face of the challenge to the currency system from non-fiat virtual currencies such as Bitcoins.
India’s official engagement with crypto has been limited to tax treatment. Virtual digital assets are subject to a 30% (plus cess) flat tax on income from transfer and a 1% TDS on transactions above a specified threshold. These provisions generate revenue but do not offer investor protection, nor do they legitimise the asset class. Registration with the Financial Intelligence Unit (FIU) has been mandated for virtual digital asset service providers, but in the absence of a dedicated crypto regulation law, enforcement remains rather limited in scope.
No domestic guardrails
Though framed as a domestic financial reform, the US GENIUS Act carries global implications. Its passage also coincides with former President Donald Trump’s expanding business involvement in the crypto sector, including the promotion of digital tokens associated with his family.
The US has formalised the role of dollar-backed stablecoins as regulated instruments. Entities such as USDC and USDT now operate with oversight, offering cross-border payment capabilities that may increasingly be adopted in emerging markets. But, Indian investors must evaluate the implications of such developments carefully.
Crypto assets, including stablecoins, currently operate in India without any statutory protection. In the event of a loss, whether through a security breach, mismanagement, or fraud, investors have no specific recourse under Indian law.
There is no dedicated legislation under the IT Act or elsewhere that addresses digital asset theft or platform liability. While police complaints can be filed and civil proceedings initiated, the legal process is often slow, unclear, and ill-equipped to handle the technical complexities of crypto-related offences.
This lack of regulatory clarity leaves Indian investors vulnerable. Platform assurances notwithstanding, investor interests remain outside the scope of enforceable protection. The ecosystem remains informal in practice, regardless of how sophisticated its products may appear.
Moreover, any loss of confidence in a major stablecoin, for instance, in the event of a reserve mismanagement or issuer insolvency, could trigger liquidity shocks that spill across borders.
Investor protection key
At a time when major economies are experimenting with digital currencies and regulated stablecoins, India’s focus must remain on shielding its financial system from premature exposure. The priority is not to facilitate crypto innovation, but to prevent investor harm and systemic risk. This includes enforcing clarity on the legal status of digital assets, restricting unlicensed operators, and strengthening disclosure and cybersecurity obligations where such platforms continue to function.
No retail investor should be left dependent on the assurances of a private platform after a cyberattack. Whether the loss is ₹2 crore or ₹2,000 crore, it cannot remain beyond the reach of formal institutional scrutiny. The experience of the past year has made one fact clear: taxation alone does not amount to regulation, and verbal commitments from exchanges are no substitute for enforceable protections.
The GENIUS Act may carry significance in the American context. For Indian investors, it remains a foreign development, not a template to adopt. The domestic reality is starkly different: digital assets continue to operate in a loosely supervised space, marked by recurring risk events and limited accountability.
Until clear legal frameworks are introduced or a decision is made to formally restrict such activity, Indian investors should treat crypto developments abroad with caution. Interest in global headlines must not override the lack of basic safeguards at home.
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Published on July 22, 2025
