Increased pressure has been placed on the government by India’s Supreme Court to establish cryptocurrency regulations, with bitcoin trading being criticized as resembling hawala transactions and warnings issued regarding its unregulated influence on the national economy.
Supreme Court Presses for National Crypto Policy, Calls It Hawala-Like
A clear policy on cryptocurrency regulation was urged to be established by the central government, according to the Supreme Court of India, which expressed concerns over its potential economic effects and compared bitcoin transactions to illicit financial practices. The matter was brought up during a bail hearing on Monday for an individual accused of conducting illegal bitcoin trading in Gujarat. The issue was raised by a bench consisting of Justices Surya Kant and N. Kotiswar Singh, who addressed Additional Solicitor General Aishwarya Bhati, appearing on behalf of the Centre.
Why does Centre not come out with a clear cut policy on regulating cryptocurrency? There is a parallel under-market for it and it can affect the economy. By regulating the cryptocurrency, you can keep an eye on the trade.
The bench stated:
Justice Surya Kant went a step further by asserting that “trading in bitcoin is an illicit trade, more or less equivalent to a Hawala operation.” In response, Bhati indicated that guidance would need to be obtained from the government before an official stance could be presented.
These observations were made by the bench while considering the bail application of Shailesh Babulal Bhatt, who had been arrested on allegations of defrauding investors by promising exaggerated returns through bitcoin investments. As stated by the prosecution, Bhatt was identified as a prominent aggregator within Gujarat’s bitcoin ecosystem and was reportedly involved in coercive methods, including kidnapping, to advance his fraudulent schemes.
The absence of regulation in India’s cryptocurrency sector has previously been highlighted by the Supreme Court. On May 5, concern was again expressed by the court regarding the lack of a defined legal structure, with bitcoin transactions once more being likened to hawala dealings. It was argued by the defense that a 2020 ruling by the Supreme Court, which invalidated a Reserve Bank of India (RBI) circular prohibiting banks from facilitating cryptocurrency transactions, effectively legitimized crypto trading and undermined the charges brought against the accused. Additionally, the case seeks the dismissal of multiple FIRs filed across the country, which allege that Bhatt defrauded investors.
Since the introduction of a 2019 draft bill proposing a ban on private cryptocurrencies and the creation of a central bank digital currency, regulatory clarity for India’s cryptocurrency sector has yet to be achieved. Although no formal legislation was enacted, crypto assets began to be taxed by the government in 2022, with a 30% tax on gains and a 1% TDS, effectively classifying them as speculative assets lacking legal recognition. Enforcement efforts have been intensified through the implementation of stricter KYC protocols and enhanced oversight. Divergence remains among regulatory authorities: while SEBI has shown willingness to oversee the crypto space, the Reserve Bank of India (RBI) continues to oppose its adoption, citing risks to financial stability.
