Skip to content
Home » Insights » Preparing for the Virtual Revolution: Legal Strategies for Indian Businesses Entering the Metaverse and Web3 Ecosystem

Preparing for the Virtual Revolution: Legal Strategies for Indian Businesses Entering the Metaverse and Web3 Ecosystem

Navigate the Digital Frontier: Metaverse Legal Readiness for Indian Web3 Ventures

India’s digital economy is evolving fast. Businesses are stepping into immersive virtual environments and decentralised ecosystems powered by blockchain. From buying virtual property to launching NFTs and transacting with tokens, Indian enterprises are entering the Metaverse and Web3 at full speed.

But without Metaverse Legal Readiness, this digital progress can quickly spiral into legal complications. Whether you’re a startup developing VR platforms or an investor exploring digital assets, you need a proactive legal strategy Customised for India’s regulatory landscape.

Understanding the Indian Metaverse & Web3 Ecosystem

The Metaverse allows users to interact in immersive virtual spaces, while Web3 promises a decentralised internet governed by smart contracts and community tokens. For Indian companies, this opens up massive business opportunities—from digital art marketplaces to virtual real estate and tokenised equity.

However, the Indian legal framework hasn’t caught up with this innovation. Gaps in regulation and enforcement can create legal vulnerabilities in areas like:

  • Virtual Property Rights
  • Digital Asset Protection
  • Jurisdiction in Web3
  • Future Market Access

1. Virtual Property Rights and Metaverse Legal Readiness

In the Metaverse, assets like land, avatars, NFTs, and wearables hold tangible value. Yet, Indian law does not formally recognise virtual property rights under traditional frameworks like the Transfer of Property Act, 1882.

Why this issue arises in India: The absence of a legal definition or protection for digital ownership creates ambiguity. Most virtual assets are governed by private platform terms rather than enforceable property law.

Actionable Steps:

  • Define ownership contracts: Draft clear platform Terms & Conditions that define virtual ownership, resale, and IP rights under Indian contract law.
  • Use blockchain as proof: Leverage blockchain to record asset ownership, ensuring digital asset protection even in legal grey zones.
  • Register IP: Secure copyright or trademark protection for your digital assets through India’s IP authorities.

Relevant Indian Laws & Cases:

  • Indian Contract Act, 1872: Enforces terms related to virtual asset transactions.
  • IT Act, 2000 – Sec. 75: Applies even to digital transactions involving foreign entities if the impact is felt in India.
  • Copyright Act, 1957: Protects original digital works, including content minted as NFTs.
  • Case Law: In Digital Collectibles v. Galactacus Funware (Delhi HC, 2023), the court ruled NFTs derive value from the IP they represent—setting a precedent for treating them under IP law.

2. Digital Asset Protection and Metaverse Legal Readiness

Digital asset protection is critical in a landscape rife with scams, wallet theft, and decentralised hacks. This includes crypto holdings, NFTs, and tokenised equity or rewards.

  • Why this is common in India:
  1. Widespread crypto use with limited investor awareness
  2. Cross-border activity and pseudonymity create jurisdictional and evidentiary hurdles
  3. Law enforcement lacks technical training in Web3-related crimes
  • Actionable Steps:
  1. Strengthen cybersecurity: Use multi-signature wallets, penetration testing, and token transaction logs.
  2. Ensure KYC/AML compliance: All Virtual Digital Asset (VDA) service providers must now comply with the Prevention of Money Laundering Act (PMLA).
  3. Mitigate risk: Get insured for digital theft (where available) and adopt a documented risk management framework.
  • Applicable Indian Laws:
  1. PMLA, 2002: As of 2023, covers VDAs; all exchanges and platforms must maintain KYC records.
  2. Finance Act, 2022: Taxes profits from VDAs at 30% with 1% TDS for transactions.
  3. IT Rules, 2021: Mandate due diligence, reporting of cyber incidents.
  4. SC Ruling: IAMAI v. RBI (2020) invalidated RBI’s crypto ban, reinforcing crypto’s legal status pending regulation.

3. Jurisdiction in Web3 and Metaverse Legal Readiness

Jurisdiction in Web3 is complex. A smart contract could involve parties from multiple countries and execute code on a server in yet another. For Indian users or companies, this raises important questions about legal jurisdiction.

Why this is frequent in India: Indian users are among the top Web3 adopters globally. But Web3 is borderless, and disputes often involve foreign servers, contracts, or platforms.

  • Actionable Steps:
  1. Add choice of law clauses: Clearly mention that contracts will follow Indian law and resolve disputes in Indian courts.
  2. Arbitration options: Include ODR (Online Dispute Resolution) or Indian arbitration panels using the Arbitration and Conciliation Act, 1996.
  3. Maintain Indian nexus: Hosting servers, legal entities, or contracts in India strengthens your local legal position.
  • Legal Basis:
  1. Section 75, IT Act: Extends India’s jurisdiction to global cyber activity impacting Indian systems.
  2. CPC, 1908: Governs domestic jurisdiction rules.
  3. Case Law: Google India v. Visaka Industries (2015) – Indian courts held jurisdiction over global entities if their actions affected Indian citizens.

4. Future Market Access and Metaverse Legal Readiness

India’s approach to Web3 remains cautious but evolving. While regulators recognise blockchain’s potential, there is no unified law for Web3 ventures yet.

Why this challenge persists:

  • Diverse agencies (RBI, SEBI, Finance Ministry) offer fragmented guidance
  • Policy focus is on consumer protection and financial stability, not innovation

Actionable Steps:

  • Track legal updates: Monitor circulars and guidelines from RBI, SEBI, and MeitY.
  • Participate in sandboxes: Engage with regulatory sandboxes from SEBI or RBI to test projects.
  • Advocate smartly: Join industry associations and provide feedback on proposed laws.

Outlook: India’s Future in Web3 and Metaverse Legal Readiness

The Indian legal system is preparing to shift from patchwork policies to a holistic digital law ecosystem.

Anticipated Changes:

  • Digital India Act (Expected 2025): Aims to regulate smart contracts, AI, DAOs, and more.
  • Global harmonisation: India’s G20 presidency has positioned it to align Web3 regulation with international standards.
  • DPDP Act, 2023: Regulates data rights—key to privacy in Metaverse applications.
  • Targeted enforcement: Expect more scrutiny, especially in token-related fraud or misuse.
Be Future-Ready with LawCrust

LawCrust Legal Consulting, a subsidiary of LawCrust Global Consulting Ltd., provides premium Legal services, ranked among the top 10 legal consulting firms in India, and offers business-focused legal solutions that go beyond compliance. As a Top corporate law firm service provider in India, we specialise in contracts, company law, M&A, Fundraising Solutions, Startup Solutions, Insolvency & Bankruptcy, Debt Restructuring, Hybrid Consulting Solutions, IBC matters, data protection, intellectual property (IP), and cross-border structuring for NRIs. Our fixed-cost legal plans and virtual access make legal support simple, strategic, and scalable.

Need reliable legal backing for your business? Partner with LawCrust — where legal meets growth.

Contact LawCrust Today!

Tags:

Leave a Reply

Your email address will not be published. Required fields are marked *