New Delhi, April 19, 2025 –
As the adoption of cryptocurrencies and digital assets accelerates across India, a glaring issue remains largely unaddressed — the lack of reliable Indian crypto custody solutions. While wallets and custody tools play a critical role in securing digital assets, India is yet to develop a strong domestic infrastructure for safeguarding crypto holdings. This absence not only increases the risk for Indian investors but also stunts the growth of a secure, regulated crypto economy.
A crypto wallet allows users to send, receive, and store digital assets by managing cryptographic keys — private and public. The private key functions like a password that enables transactions, while the public key serves as an address for receiving funds. These wallets can be categorized into:
- Hot wallets (connected to the internet; convenient but more vulnerable)
- Cold wallets (offline; more secure, such as Ledger or Trezor)
- Custodial wallets (managed by third parties, typically exchanges)
- Non-custodial wallets (where users have full control over their keys)
Without secure custody frameworks, users remain exposed to risks such as hacking, lost keys, and exchange collapses — threats that have already impacted millions globally.
Also read: Why SEBI Should Allow Crypto ETFs: A Case for Innovation and Investor Protection
India ranks among the top nations for grassroots crypto adoption, yet there is a critical gap in locally developed crypto wallet and custody services. Even more concerning is the lack of clear regulatory guidelines for such service providers. This regulatory void could lead to dangerous consequences, much like allowing unregulated entities to handle securities in the traditional financial system.
Without a defined framework, there’s no accountability — a risk that no fast-growing digital economy should ignore.
To reduce reliance on centralized exchanges — often vulnerable to cyberattacks or shutdowns — Indian users must be empowered to use self-custody solutions such as hardware wallets, cold storage, and multi-signature wallets. These decentralized solutions offer significantly higher security and give users full control over their assets.
Essential security features like multi-factor authentication (MFA), end-to-end encryption, and multi-signature authorization must become standard, not optional. Recent exchange hacks have shown that without secure custody, the losses fall squarely on consumers.
Offshore Custody and Capital Flight: The Economic Impact
Due to the absence of trustworthy domestic custody options, many Indian investors and companies are turning to offshore crypto custody providers. This trend leads to:
- Increased capital outflow
- Higher risk of fraud and data breaches
- Reduced regulatory oversight
This shift not only endangers users but also affects India’s financial sovereignty. Introducing clear crypto custody regulations in India can reverse this trend and help retain both value and control within the national jurisdiction.
To build a secure digital asset ecosystem, the Indian government must:
- Create a clear regulatory framework for crypto custody service providers
- Launch incentives such as tax benefits, regulatory sandboxes, and compliance certifications for domestic startups
- Encourage blockchain innovation and job creation within the country
Such steps will foster investor confidence, reduce dependency on foreign entities, and position India as a global hub for Web3 and digital finance innovation.
From a law enforcement perspective, keeping crypto assets within Indian jurisdiction is vital. Currently, many virtual digital assets (VDAs) are stored on foreign platforms, complicating investigations into cybercrime, money laundering, and terrorist financing.
A robust Indian crypto custody framework would provide LEAs (Law Enforcement Agencies) with faster access to transactional data, enabling swift asset recovery and regulatory compliance. This is key to combating regulatory arbitrage, where bad actors exploit cross-border loopholes to evade accountability.
For India to lead the global digital economy, it must embrace a secure, transparent, and innovation-friendly crypto regulatory environment. This includes well-defined laws, reliable domestic custody solutions, and proactive government support.
The time to act is now — protecting Indian crypto investors, supporting local innovation, and safeguarding national interests begins with building a strong foundation for crypto custody in India.
Leave a Reply