Blockchain is a shared, immutable digital ledger, enabling the recording of transactions and the tracking of assets within a business network and providing a single source of truth. Blockchain operates as a decentralized distributed database, with data stored across multiple computers, making it resistant to tampering. Transactions are validated through a consensus mechanism, ensuring agreement across the network.
In blockchain technology, each transaction is grouped into blocks, which are then linked together, forming a secure and transparent chain. This structure guarantees data integrity and provides a tamper-proof record, making blockchain ideal for applications like cryptocurrencies and supply chain management. Its core featuresimmutability, transparency, pseudonymity, and automation through smart contracts—challenge conventional legal frameworks that are built around centralised control, identifiable intermediaries, and territorial jurisdiction.
Indian Legal Position: Fragmentation and Uncertainty
India doesn’t have one single law for blockchain. Instead, it uses existing rules from technology, finance, tax, and anti–money laundering to manage it, just like many other countries do. The law makes a clear difference between blockchain technology and crypto assets. If blockchain is used for things like record keeping or business automation, it faces fewer legal issues. But when it comes to crypto (like trading coins or running exchanges), the rules are much stricter.
The main laws that affect blockchain are the Information Technology Act, the Prevention of Money Laundering Act, tax laws, and specific rules for industries like banking. Blockchain applications are indirectly regulated through the Information Technology Act, 2000, Indian Contract Act, 1872, and sector-specific regulations. These laws neither recognise smart contracts nor provide clarity on liability, jurisdiction, or enforcement in decentralised systems, resulting in regulatory ambiguity.
Laws Governing Blockchain in India
India currently lacks a dedicated legislation regulating blockchain technology. Instead, blockchain-based applications are governed indirectly through existing legal and regulatory frameworks, depending on their nature and use. The key laws applicable to blockchain in India are discussed below.
Information Technology Act, 2000
The Information Technology Act, 2000 forms the backbone of India’s digital and cyber law regime. Blockchain applications involving electronic records, digital signatures, and data transmission fall within the scope of this Act.Section 3 and 3A recognize electronic and digital signatures, which are crucial for blockchain-based authentication mechanisms. Additionally, Section 43 and Section 66 impose liability for unauthorized access and data damage, which may arise in blockchain networks.
Indian Contract Act, 1872
Smart contracts operating on blockchain platforms derive their legal validity from the Indian Contract Act, 1872. For a smart contract to be enforceable, it must fulfill the essential elements of a valid contract such as free consent, lawful consideration, lawful object, and competency of parties.Although smart contracts are not expressly recognized, courts may enforce them if these conditions are satisfied.
Digital Personal Data Protection Act, 2023
The Digital Personal Data Protection Act, 2023 applies to blockchain-based systems that process personal data, even though the technology is not expressly mentioned in the statute. Blockchain platforms function as data fiduciaries when they collect or process identifiable personal data and must comply with obligations relating to consent, lawful purpose, data minimization, and security safeguards.
However, the immutable nature of blockchain creates challenges in complying with rights such as correction and erasure of data. To address this conflict, entities often adopt off-chain storage, encryption, or anonymization techniques. In the absence of specific regulatory guidance, aligning blockchain innovation with data protection requirements remains a significant legal challenge in India.
Reserve Bank of India Regulations
The Reserve Bank of India (RBI) regulates blockchain applications involving cryptocurrencies, payment systems, and digital assets. While RBI does not prohibit blockchain technology itself, it imposes restrictions on crypto-related financial activities and has introduced the Central Bank Digital Currency (CBDC) under the Digital Rupee framework.
Securities Laws (SEBI Regulations)
The Securities and Exchange Board of India (SEBI) regulates blockchain-based activities where digital tokens or assets qualify as securities under Indian law. Blockchain applications such as security token offerings, tokenized securities, and crypto-assets with investment characteristics may attract compliance under the SEBI Act, 1992 and related regulations. While SEBI has not issued a dedicated blockchain regulation, it has cautioned investors against unregulated crypto schemes and supports the use of blockchain technology in market infrastructure, including clearing and settlement systems. Regulatory oversight is determined by the nature and function of the blockchain-based asset rather than the technology itself.
Intellectual Property Laws
Blockchain innovations may be protected under Indian intellectual property laws such as the Patents Act, 1970 and the Copyright Act, 1957. While blockchain algorithms per se may not be patentable, technical applications demonstrating industrial applicability may receive protection.
Judicial Interpretation
Indian courts have not yet developed extensive jurisprudence on blockchain technology. However, courts have recognized electronic records and digital evidence under the Evidence Act, 1872, which may extend to blockchain-based records in the future.
In Internet and Mobile Association of India v. Reserve Bank of India (2020), the Supreme Court struck down the RBI circular restricting banking access to cryptocurrency businesses, holding that such businesses are protected under Article 19(1)(g) of the Constitution.However, the Court refrained from framing regulatory principles for blockchain or crypto assets, thereby leaving a legislative vacuum.
Similarly, in Anuradha Bhasin v. Union of India (2020), the Supreme Court held that state action involving technology must satisfy legality, necessity, and proportionality. Despite this constitutional mandate, blockchain governance in India remains largely executive-driven without parliamentary legislation.
Expert Committee Opinion On Blockchain Governance And Regulatory Compliance
The need for blockchain regulation has been repeatedly acknowledged by expert committees, yet their recommendations remain largely unimplemented.
The Inter-Ministerial Committee (IMC) on Virtual Currencies (2019) recognised the underlying potential of blockchain technology while recommending a ban on private cryptocurrencies. Importantly, the Committee distinguished between cryptocurrency misuse and blockchain innovation, recommending that blockchain applications be encouraged through regulatory clarity. However, no comprehensive blockchain legislation followed.
The Standing Committee on Finance (2021) examined challenges related to cryptocurrencies and blockchain technology and explicitly recommended the formulation of a clear regulatory framework to protect investors while fostering innovation. The Committee cautioned against a blanket ban and emphasised the need for nuanced regulation.
Further, NITI Aayog has consistently advocated the adoption of blockchain in governance, land records, supply chains, and public service delivery. In its discussion papers, NITI Aayog highlighted the absence of a legal framework as a major impediment to large-scale blockchain deployment in India.Despite policy enthusiasm, legislative action remains absent.
Conclusion
In the absence of a comprehensive legislative framework, blockchain technology in India continues to be regulated through a combination of existing laws, regulatory guidelines, and policy initiatives. There is a growing need for a dedicated regulatory framework to address legal uncertainties surrounding smart contracts, data protection, and digital assets.Judicial pronouncements, committee reports, and comparative jurisprudence unanimously point towards one conclusion: India’s technology-neutral and fragmented approach is no longer adequate. While expert committees have recognised blockchain’s potential and risks, the absence of a blockchain-specific legal framework has resulted in uncertainty, misuse, and missed opportunities.
Author Name- Saraswati
