India -- Custody Regulations Regulatory Overview

India lacks a comprehensive, dedicated framework for cryptocurrency or digital asset custody, with regulations primarily enforced through anti-money laundering (AML) rules under the Prevention of Money Laundering Act (PMLA) rather than specific custodial licenses or mandates for segregation, insurance, cold storage, or qualified custodians.[1][2][6][8]

Custodial License Requirements

No specific custodial license exists for crypto assets; instead, custodial wallet providers and exchanges acting as Virtual Digital Asset (VDA) service providers must register with the Financial Intelligence Unit-India (FIU-IND) as reporting entities, enabling operations in India (including for international platforms serving Indian users).[1][2][5] This registration enforces banking-level KYC/AML compliance, including customer due diligence, transaction monitoring, record-keeping, and reporting suspicious activities to FIU-IND, with implementation starting March 2023.[1][2][3]

Segregation of Client Assets Rules

No explicit statutory rules mandate segregation of client assets; however, industry practices among registered exchanges (e.g., CoinDCX, WazirX, ZebPay) include segregated cold storage and multi-signature wallets to ensure recoverability, transparency, and user control, aligning with broader RBI and FIU-IND oversight for financial integrity.[5] Emerging norms under the Digital Personal Data Protection (DPDP) rules push for institution-grade custody with segregation of duties and hardened key management.[3]

Insurance/Bonding Requirements

No mandatory insurance or bonding requirements are specified in current regulations for crypto custodians.[1][2][5][8]

Cold Storage Mandates

No regulatory cold storage mandates exist, though compliant exchanges voluntarily adopt cold storage as part of institutional-grade security to meet FIU-IND and RBI transparency norms.[5]

Qualified Custodian Definitions

No official qualified custodian definition applies to crypto assets; cryptocurrencies are treated as VDAs under the Income Tax Act (not legal tender) and recently recognized as "property" by the Madras High Court in 2025, potentially implying stronger custody standards akin to securities but without codified rules.[4][7]

Pending Custody Legislation

No specific pending bills target crypto custody, but experts highlight the need for a dedicated custody framework to reduce systemic risk, enable institutional adoption, and align with global standards—potentially involving clearer rules on security, investor protection, and property status implications.[3][7][9] Oversight remains fragmented across RBI (monetary policy), Ministry of Finance (tax/policy), FIU-IND (AML), and SEBI (securities aspects), with no consolidated crypto law as of mid-2025.[1][2][6][8] A 2025 Madras High Court ruling on crypto as property may accelerate demands for custody-specific regulations.[4][7]