In what ways does the attachment of assets in crypto-related cases challenge existing economic and legal frameworks in India?

Cryptocurrency is a relatively new digital asset class in India, and its use in illegal activities has led enforcement agencies like the Enforcement Directorate (ED) to attach assets worth thousands of crores. However, the attachment of crypto assets presents unique challenges to India’s traditional economic and legal frameworks, which were designed before the advent of digital currencies.

• Lack of Clear Legal Definition: Cryptocurrencies are not recognized as legal tender or a specific asset class in India. This creates ambiguity in applying existing laws, such as the Prevention of Money Laundering Act (PMLA), to crypto assets.
• Jurisdictional Issues: Crypto assets are decentralized and can be stored or transferred across borders instantly. This makes it difficult for Indian authorities to trace, freeze, or attach assets that may be held in wallets outside India’s jurisdiction.
• Challenges in Identification and Valuation: Identifying the owner of a crypto wallet and valuing crypto assets is complex due to encryption, anonymity, and price volatility. This complicates the process of asset attachment and recovery.
• Enforcement Difficulties: Unlike traditional assets (such as land or bank accounts), cryptocurrencies can be easily moved or hidden with a private key. Enforcement agencies face technical challenges in securing and managing seized crypto assets.
• Regulatory Gaps: The absence of a comprehensive regulatory framework for cryptocurrencies in India leads to confusion over which agency is responsible for regulation, investigation, and prosecution in crypto-related offences.
• International Cooperation: Crypto crimes often involve international actors and exchanges, requiring cooperation with foreign agencies and compliance with global standards, which is still evolving in India’s context.
• Impact on Economic Policy: Large-scale attachment of crypto assets raises questions about their treatment in the national economy, taxation, and the implications for capital flows and financial stability.