On 29 October 2026, a Supreme Court bench led by Chief Justice Surya Kant said the Reserve Bank of India’s coming rules must make banks compensate digital arrest and cyber fraud victims with “not less than” the amount lost, when the fraud happened because the bank failed in its due diligence.
That is a banking story. It is also a crypto story, because police investigations this year keep finding the same last step: the stolen rupees are turned into USDT and sent abroad.
What the court actually said
The order is not yet a final rule. The court wants to examine RBI’s proposed (Know Your Customer) Amendment Directions, 2026, which RBI plans to notify by 30 November and put into effect by 31 December. The bench also asked for systems that temporarily hold transactions that break from an account’s usual pattern, alert the police, and verify them physically. Bank officials who collude with fraudsters could face prosecution.
The numbers behind it, from a status report filed in court, are 21,928 complaints involving more than ₹647 crore on the National Cybercrime Reporting Portal in January to August 2026. The CJI put this year’s net loss at almost ₹800 crore, against about ₹3,000 crore the year before.
Where the money goes: a timeline from police files
Four cases reported this year show the same route:
| Case | What police found |
|---|---|
| Pune, 82-year-old victim | ₹10.74 crore moved through 5,436 bank accounts in over a dozen states, then converted to USDT or withdrawn as cash |
| Gurugram | 43 mule accounts serving a gang abroad, money from 700+ victims converted to USDT and remitted |
| Hyderabad, ₹29.17 lakh | Cash withdrawn and redeposited, then used to buy USDT, which was sold online for rupees |
| Delhi ring | Mule accounts controlled by China-based operators via SMS-forwarding malware, funds converted to USDT |
Our own arithmetic on the Pune case: ₹10.74 crore split across 5,436 accounts is about ₹19,760 per account. Small hops like that are built to stay under the radar of any single bank. That is why the court’s idea of holding an unusual transaction matters more than any later crypto tracing. Once the rupees reach a wallet abroad, Indian banks and police have far less reach.
BtcMedia verdict
The court is aiming at the right point in the chain. The crypto leg is fast and cross-border; the bank leg is slow, domestic and regulated. The proposed RBI directions cover banks and other RBI-regulated entities. Crypto exchanges in India are a different case: they register and report to FIU-IND under anti-money-laundering law, not to RBI. So a stronger bank rule does not by itself change what happens on the USDT side.
The gap in today’s protection is large. RBI’s e-banking fraud compensation that takes effect in January pays at most ₹25,000, and only on losses up to ₹50,000. The average digital arrest complaint this year works out to about ₹2.95 lakh (₹647 crore ÷ 21,928). The cap covers roughly 8.5% of that.
What it means for Indian investors
- No police officer, CBI or ED official will ever “arrest” you on a video call or ask you to move money for “verification”. Hang up and call the national cyber helpline 1930.
- If you trade crypto P2P, the rupees you receive can come from a mule account. The Hyderabad case shows USDT being sold online for rupees after the fraud. Use a FIU-IND registered exchange and keep records. Our guide on P2P buying and the 1% TDS covers the paperwork side.
- Never rent or lend your bank account for a “commission”. In Gurugram, the account operator took 30% and was arrested.
- If crypto you hold is stolen, the tax rules don’t help either: India gives no tax loss for hacked or scammed crypto.
FAQ
Will banks now repay every digital arrest victim? Not automatically. The court said compensation should apply where the fraud happened because of the bank’s due-diligence failure. The final RBI directions are due by 30 November 2026.
Does this rule cover money lost through a crypto exchange? The proposed directions are RBI rules for financial institutions it regulates. Indian crypto exchanges report to FIU-IND, so this order does not directly cover them.
What should I do right after a scam transfer? Call 1930 or file at cybercrime.gov.in as fast as possible, and tell your bank so it can try to freeze the funds before they move on.
How we calculated this: average loss = ₹647 crore ÷ 21,928 complaints (Jan-Aug 2026, MHA/I4C status report as reported by Hindustan Times); Pune per-account figure = ₹10.74 crore ÷ 5,436 accounts. Checked 31 October 2026, 12:55 AM IST.
This is not financial or legal advice.