India's crypto landscape may soon see a significant shift with the introduction of the Crypto-systems Oversight, Innovation and Strategy (COINS) Act. This proposed model law, developed by Hashed Emergent and Black Dot, aims to provide a clear, industry-led framework for digital asset regulation, addressing long-standing issues like punitive taxation and regulatory uncertainty.
Key Takeaways
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The COINS Act is a non-binding model law designed to offer a legislative blueprint for crypto regulation in India.
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It proposes the creation of a new regulatory body, the Crypto Assets Regulatory Authority (CARA).
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The framework emphasizes fundamental crypto rights, including self-custody and financial privacy.
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It seeks to reverse the trend of Indian crypto projects relocating offshore due to regulatory challenges.
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The Act also suggests establishing a strategic Bitcoin reserve for India.
A Blueprint for Regulatory Clarity
The COINS Act emerges as a direct response to India's current ambiguous and often punitive regulatory environment for cryptocurrencies. According to Arvind Alexander, legal counsel at Hashed Emergent, the lack of clear, principled laws has left builders and users without express legal rights concerning self-custody, privacy, and permissionless protocol access. This uncertainty is compounded by an "extreme tax regime," which includes a 30% flat tax on profits from virtual digital assets and a 1% tax deducted at source (TDS) on transactions over $115.
Enshrining Crypto Rights and Calibrated Oversight
The COINS Act aims to "flip the policy script" by enshrining fundamental crypto rights as extensions of India's Constitution. This framework provides layered fundamental rights tailored to actual custody and control profiles:
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Centralized Exchanges: Face full licensing requirements.
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Non-Custodial Protocols: Subject to a simple disclosure regime.
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Truly Permissionless Protocols: Fully exempt from compliance.
This calibrated approach seeks to foster innovation while ensuring appropriate oversight.
Reversing the Developer Exodus and Proposing a Bitcoin Reserve
Vishal Achanta, senior legal counsel at Hashed Emergent, highlights that India has experienced a significant exodus of DeFi protocols, crypto gaming studios, and infrastructure projects due to the country's "punitive tax regime and regulatory guesswork." The COINS Act aims to "actively reverse the offshoring phenomenon" by transforming India into a preferred destination for crypto innovation through rights-first certainty, innovation-safe harbors, and calibrated oversight.
Furthermore, the model law proposes the creation of a strategic Bitcoin (BTC) reserve for India. This reserve would be overseen by parliament and seeded by legally seized crypto assets, supplemented by modest market buys. This proposal aligns with recent calls from Indian politicians, such as Pradeep Bhandari of the ruling BJP party, for regulatory clarity and a Bitcoin reserve pilot to bolster economic resilience.
Pushing for Adoption
Hashed Emergent and Black Dot plan to actively promote the COINS Act. Hashed Emergent will co-host an event with the Bharat Web3 Association to compare the COINS Act with other upcoming regulations and the Department of Economic Affairs' discussion paper. Black Dot intends to conduct workshops with key financial bodies, including the Ministry of Finance, Securities and Exchange Board of India, and the Reserve Bank of India, to present the model's concepts for further discussion. This collaborative approach, inspired by the "strength in numbers" ethos of the crypto community, seeks to push the model law forward to policymakers.
Sources
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COINS Act Model Law to Guide India’s Crypto Regulation, Cointelegraph.
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