Maharashtra Extends MPID Act Protection to Virtual Digital Assets, Strengthens Safeguards Against Crypto-Linked Fraud
Pune, 4th August 2026: In a significant move to address the growing threat of technology-driven financial fraud, Maharashtra has amended the Maharashtra Protection of Interest of Depositors (MPID) Act to extend investor protection to frauds involving Virtual Digital Assets (VDAs), including cryptocurrencies and other blockchain-based digital assets.
The Maharashtra Protection of Interest of Depositors (in Financial Establishments) (Amendment) Bill, 2026, introduced on June 30, seeks to bridge a legislative gap by ensuring that fraudulent schemes involving digital assets can be dealt with under the existing MPID framework.
The amendment brings Virtual Digital Assets within the definition of “deposit” under the MPID Act by adopting the definition provided under Section 2(111) of the Income-tax Act, 2025. This move provides consistency across laws while ensuring that investors who lose money through cryptocurrency-based frauds receive the same legal protection available in traditional financial fraud cases.
The MPID Act, enacted in 1999, was designed to protect depositors from fraudulent financial establishments by empowering the state to attach properties of defaulting entities and facilitate recovery through designated courts.
However, as cryptocurrencies and blockchain-based assets became increasingly popular, the law did not explicitly cover investments made through such digital instruments.
According to the Statement of Objects and Reasons accompanying the amendment, financial frauds, unauthorised deposit schemes and investor deception are increasingly being carried out using cryptocurrencies, digital coins and other blockchain-based assets, necessitating legislative intervention.
Apart from expanding the definition of “deposit,” the amendment also introduces procedural reforms aimed at speeding up recovery proceedings. Designated Courts will now generally be permitted to grant only two adjournments, with a third adjournment allowed only in exceptional circumstances after recording reasons in writing.
Another key provision requires financial establishments to deposit 50 per cent of their aggregate liability with the Competent Authority before filing an appeal against an order of a Designated Court. The government said the measure is intended to discourage frivolous appeals that delay recovery while preserving the right to appeal in deserving cases.
Legal experts note that the amendment is focused on strengthening investor protection rather than regulating cryptocurrencies.
Commenting on the development, Dr Ashish Patankar, Special Invitee, said, “The Maharashtra MPID Amendment is a timely and forward-looking step that extends investor protection to frauds involving Virtual Digital Assets, including cryptocurrencies. By widening the definition of ‘deposit’ and strengthening recovery mechanisms through stricter adjournment limits and pre-deposit requirements for appeals, the law ensures faster and more effective redressal. Importantly, it does not regulate or legitimise crypto assets but reinforces the core objective of safeguarding investors from evolving financial frauds.”
The amendment does not legalise or prohibit cryptocurrency trading, nor does it create a regulatory framework for digital asset exchanges. Instead, it ensures that investor protection laws keep pace with evolving financial technologies by enabling authorities to take action against frauds involving Virtual Digital Assets under the MPID Act.
Legal observers believe Maharashtra’s approach could serve as a legislative model for other states as digital assets become increasingly integrated into financial transactions and investment schemes.
