Is Indian Law Ready for the Metaverse and Web3?

India is one of the countries that’s quickly climbing the Web3 ladder. According to a 2024 report by Hashed Emergent and The India Blockchain Forum, the country already has over 1,200 active Web3 startups, and it will likely have the largest Web3 talent pool by 2028.

However, even if that’s the case, the legal framework surrounding these industries hasn’t kept pace. While developers and investors pour time and money into decentralized tech, there’s still no dedicated legislation governing the metaverse, digital assets, or even blockchain-based interactions.

Earlier this year, the Supreme Court flagged the government’s delay in drafting crypto regulations. They pointed out the legal ambiguity surrounding platforms that handle real financial risk.  That said, we can expect that the tension between technological advancements and legalities will only deepen.

Before more Indian users begin spending, working, and socializing in Web3 environments, lawmakers surely have to decide which rules apply and who gets to enforce them.

Metaverse and Web3 Explained

The metaverse refers to digital spaces designed for real-time interaction. People enter these spaces through avatars or their digital likeness or counterparts. It could be for fun, to attend virtual events, play games, build communities, or even buy and sell virtual items. Some platforms focus on entertainment, while others blur the line between work and social life.

Web3 expands the concept further. It’s a shift in how the internet functions, and is built around decentralized systems where users have more control over their data and assets. Blockchain networks, smart contracts, and crypto wallets form its foundation. In many cases, users don’t just participate, but they contribute to the system’s governance and economics.

The thing is that these two concepts often intersect. Digital property, identity, and money now move between Web3 platforms and metaverse spaces without passing through any central authority. That movement is what raises questions or concerns about who holds the rights, what rules apply, and how legal accountability fits in.

So Who Owns What in Web3? The Challenge for Lawmakers

Web3 systems are built to remove middlemen. That’s part of the appeal, but it’s also what makes regulation tricky. If there’s no central entity in charge, it becomes harder to identify who holds legal responsibility when something goes wrong. For example, if a digital asset is stolen or a smart contract fails, who’s liable? The developer, the user, or the protocol itself?

Now, ownership is another gray area. Assets stored on the blockchain don’t follow the same legal framework as physical or even traditional digital property. So, even if you hold a token in your wallet, there’s no formal recognition under Indian law of what that token represents.

Even more complicated are community-run platforms where decisions are made by vote. In these cases, collective governance doesn’t easily translate to legal accountability. This leaves courts with no clear defendant, and users with no clear protections.

Use of Digital Currencies: What Existing Laws Can Be Tweaked?

The Reserve Bank of India (RBI) has repeatedly warned against using crypto for transactions, yet it’s not technically banned. So, platforms that rely on cryptocurrency are in a strange position since they’re neither fully illegal nor regulated.

Some foreign-based services operating in India take advantage of that gap. 10CRIC online casino, for instance, accepts digital payments from Indian users despite gambling being a state-regulated subject. Because the platform is hosted abroad and uses crypto and third-party payment systems, it often falls outside immediate regulatory reach.

But there’s no denying that such platforms, and transactions that’ll be made in the metaverse and Web3, are convenient because of digital currencies. People will likely continue using them even if a ban will be imposed, and that could leave them more vulnerable to the risks they come with.

That’s why, instead of trying to ban this technology, it might be best for the existing laws to be updated instead. Laws like the FEMA or the Information Technology Act could be updated to address cross-border payments and wallet-based transactions.

What India Can Learn From Other Countries

While updating specific laws is a long process, India can get ideas from other countries that have already set the rules regarding these matters. The EU’s MiCA framework is already in motion, and this provides crypto firms a licensing path and users clearer protections.

Singapore is also taking a similar approach, and they aim to regulate the activity without killing the innovation and its potential. India doesn’t need to copy every model, but it can borrow what works. Defining key terms, setting minimum disclosure rules, and offering a proper license system could go a long way.

Conclusion

New tech won’t wait for lawmakers to catch up. People are already buying property in virtual spaces, investing in tokens, and signing smart contracts without knowing if any of it holds up legally. If India wants to keep up without losing control, the law has to stop reacting and start preparing for what’s already here. It might take a while, but any step counts.