India's SEBI published the first draft regulatory framework for crypto assets on June 26, 2026. Mandatory proof-of-reserves. 95% cold storage requirement. 10x leverage cap. 2% insurance fund. Public comments open until July 31. Here's what it means for you.
What SEBI wants from Indian crypto exchanges: (1) Monthly proof-of-reserves — independent third-party audit confirming exchange holds 1:1 backing for user funds. (2) 95% cold storage — only 5% of user funds can be in hot wallets (exchange servers). (3) 2% AUM insurance fund — exchanges must maintain a reserve to compensate hack victims. These rules would have prevented most of the WazirX 2024 hack losses.
More SEBI proposals: Maximum 10x leverage for verified retail users. 0x leverage (no leverage) for unverified users. Customer fund segregation — exchange must keep user funds separate from company funds (just like SEBI requires for brokers). Monthly regulatory filing with FIU-IND. Stablecoin restriction — only INR-backed stablecoins from licensed entities permitted on Indian exchanges. These rules bring crypto exchanges closer to stock broker standards.
Indian exchanges responded positively. CoinDCX CEO: "This is necessary for mainstream adoption." WazirX (rebuilding after 2024 hack): "Cold storage requirements align with what we've already implemented." Mudrex and Giottus: supportive of proof-of-reserves. Timeline: public consultation until July 31, 2026. Final framework expected Q3 2026. Implementation period likely 6–12 months after finalization.
For Indian crypto investors, the SEBI framework is net positive: (1) Exchanges become safer — mandatory cold storage and insurance fund protects your holdings from hacks. (2) Proof-of-reserves means no more exchange hiding insolvency (FTX-style). (3) No new taxes (framework is about safety, not additional taxation). (4) Institutional adoption accelerates with regulatory clarity. Submit your comments at sebi.gov.in before July 31. Your input shapes the final rules.
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