In a legislative move that could reshape how Indian states handle cryptocurrency-linked financial fraud, the Maharashtra government on Wednesday tabled the Maharashtra Protection of Interests of Depositors (MPID) (in Financial Establishments) (Amendment) Bill, 2026, formally bringing virtual digital assets (VDAs) and cryptocurrencies under the ambit of the state’s depositor protection framework for the first time.
As per a report by Free Press Journal, Minister of State for Home Yogesh Kadam, replying to a discussion on the amendment bill in the Legislative Assembly, confirmed that crypto assets will now be treated as recoverable property under the MPID Act.
Authorities will be empowered to assess the market value of seized crypto holdings and liquidate them for victim compensation, rather than simply freezing wallets indefinitely, a practice that has long been criticized for locking up volatile assets while their value deteriorates during prolonged court proceedings.
What the amendment changes
The original MPID Act, enacted in 1999 and given Presidential assent on January 21, 2000, was designed to protect depositors from fraudulent financial establishments promising unrealistically high returns. Its framework allowed the government to attach and auction properties of defaulting entities and distribute proceeds among victims.
However, the law predated the crypto era and contained no provisions for digital assets, leaving law enforcement scrambling to apply outdated definitions to a new asset class.
The 2026 amendment addresses this gap with several key provisions.
- Crypto as recoverable property: Virtual digital assets and cryptocurrencies are now explicitly recognized under the Act’s scope. This means designated courts can order the attachment, valuation, and liquidation of crypto holdings linked to fraudulent schemes, the same way they currently handle real estate, bank accounts, and physical assets.
- Market-value-based recovery: Instead of indefinitely freezing crypto wallets, which risks value erosion in a volatile market, authorities can now assess the prevailing market value and convert holdings to fiat for equitable distribution to victims. This is a significant operational shift. In several past cases across India, seized Bitcoin and other tokens have lost substantial value while sitting frozen in government-controlled wallets during multi-year legal proceedings.
- 50% pre-deposit for appeals: Firms or individuals found liable under the Act will now be required to deposit 50% of the disputed amount before filing an appeal in court. Kadam described this as a measure to discourage frivolous litigation and ensure that victims are not left waiting for years while accused parties exhaust every legal avenue.
- Adjournment cap: Court proceedings under the Act will now be limited to two adjournments, with a third allowed only in exceptional circumstances at the magistrate’s discretion. Financial fraud cases in Maharashtra have historically suffered from chronic delays, with some MPID matters dragging on for over a decade.
District-level financial monitoring units: A surveillance net
Perhaps the most structurally ambitious part of the amendment is the plan to establish dedicated financial monitoring units in every district of Maharashtra. These units will be tasked with proactively identifying suspicious financial entities, particularly those luring investors with promises of guaranteed or unusually high returns, and flagging them before they scale into full-blown scams.
Kadam told the Assembly that public awareness about cryptocurrencies and cybercrime remains limited, making investors, especially those in semi-urban and rural areas, particularly vulnerable to digital fraud.
The monitoring units are intended to close the gap between when a scam begins operating and when law enforcement typically gets involved, which in many cases has been months or even years after the damage is done.
Why this matters for crypto in India
Maharashtra’s move is significant for several reasons, and its implications extend well beyond the state’s borders.
First, it represents the first time an Indian state has explicitly incorporated crypto assets into a depositor protection statute. While the central government brought VDAs under the Prevention of Money Laundering Act (PMLA) in March 2023 and the Financial Intelligence Unit (FIU-IND) tightened KYC requirements for crypto exchanges in January 2026, those measures focused on compliance and surveillance.
Maharashtra’s amendment goes a step further by creating a direct legal pathway to recover crypto assets and return value to defrauded investors.
Second, the timing is relevant. Maharashtra leads all Indian states in reported cryptocurrency fraud cases. According to projections compiled from National Crime Records Bureau (NCRB) data and Indian Cybercrime Coordination Centre (I4C) reports, the state accounted for an estimated 650 crypto-related crime cases in 2025, the highest in the country, followed by Karnataka at 550 and Delhi at 450.
Chief Minister Devendra Fadnavis told the Assembly last week that 10,505 cyber financial fraud cases were registered across Maharashtra between January 2025 and May 2026, leading to 2,379 arrests. Mumbai alone reported losses exceeding Rs 1,031 crore from cyber fraud during that period.
Third, the amendment arrives at a moment when India’s broader crypto regulatory landscape remains fragmented. The country still lacks a dedicated, comprehensive cryptocurrency law. The 30% flat tax on VDA gains and 1% TDS on transfers introduced in the 2022 Union Budget remain in force, and the Union Budget 2026-27 further tightened reporting requirements with new penalties effective April 1, 2026.
But a unified regulatory framework has not materialized, and as MP Raghav Chadha noted while introducing the Asset Tokenisation (Regulation) Bill 2026 in Parliament earlier this year, nearly 73% of VDA trading by Indian users now takes place on foreign exchanges, with over 180 Indian crypto startups having relocated abroad.
The opposition’s concerns
The amendment did not pass without debate. NCP (SP) leader Jayant Patil raised concerns about the 50% pre-deposit requirement, arguing that victims of financial fraud who have already lost their life savings may find it extremely difficult to comply with such a condition. He called for the creation of more special courts and urged the government to strengthen action against cybercrime and fake social media accounts used for fraud.
Congress leader Vijay Wadettiwar pushed for stricter regulation of cooperative credit societies and urban cooperative banks, pointing to several financial scams that have exploited these institutions. BJP MLA Sumit Wankhede demanded fast-track courts specifically for financial fraud cases to reduce the chronic backlog.
The bigger picture: India’s layered approach to crypto oversight
Maharashtra’s legislative action sits within a rapidly evolving national and global context. The RBI, in its Financial Stability Report released on June 30, 2026, formally acknowledged the growing global regulatory momentum around stablecoins, referencing the United States’ GENIUS Act, the European Union’s MiCA framework, and the United Kingdom’s evolving stablecoin regime.
The central bank’s tone in the latest FSR was notably more measured compared to its December 2025 warnings, suggesting a phase of more calculated engagement with digital assets.
Meanwhile, the Enforcement Directorate has intensified its crypto-focused operations. ED Director Rahul Navin disclosed during the agency’s 70th ED Day earlier this year that crypto frauds, terror financing, and cyber-enabled crimes have become key focus areas, with the agency filing 812 chargesheets and 155 supplementary chargesheets during FY 2025-26.
The Indian government’s PRAHAAR counter-terrorism strategy, released in February 2026, specifically flagged the growing use of crypto wallets by criminal networks and established a dedicated darknet and cryptocurrency task force under the Multi-Agency Centre.
At the state level, Fadnavis has already announced a Centre of Excellence in Digital Forensics in Pune to support investigations into crypto-related fraud, and Maharashtra Cyber has been placed directly under the Director General of Police (DGP) to improve coordination.
The Crypto Times’ take
Maharashtra’s amendment to the MPID Act does not solve India’s crypto regulation problem. It does not classify what crypto is, it does not create a licensing regime for exchanges, and it does not address the tax arbitrage that is pushing trading volumes offshore. What it does, however, is something arguably more immediately practical: it gives law enforcement a concrete legal mechanism to seize, value, and liquidate crypto assets held by scammers and return the proceeds to victims.
For the estimated 34 million crypto holders in India, the real test will be in execution. The market-value-based recovery provision raises important operational questions. Who determines the valuation date? What happens in cases of extreme volatility between seizure and liquidation? How will authorities handle privacy coins or assets held on decentralized platforms? These questions remain unanswered for now.
What is clear is that Maharashtra has set a precedent. If this model proves effective, other states with similar depositor protection laws, including Tamil Nadu, Andhra Pradesh, and Jammu and Kashmir, could follow suit with their own crypto-specific amendments. For India’s digital asset ecosystem, the message from Maharashtra’s legislature is unambiguous: crypto may not yet be fully regulated, but it is no longer invisible to the law.
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