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
The Supreme Court of India urged the central government to establish a clear policy on cryptocurrency regulation, expressing concerns about its potential economic impact and likening bitcoin transactions to illicit financial practices. The court raised the issue during a bail hearing on Monday for an individual accused of conducting illegal bitcoin trading in Gujarat. A bench comprising Justices Surya Kant and N. Kotiswar Singh addressed the matter while speaking to Additional Solicitor General Aishwarya Bhati, who represented 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 stated that she would consult with the government before presenting an official stance.
The bench made these observations while reviewing the bail application of Shailesh Babulal Bhatt, who faced arrest for allegedly defrauding investors by promising inflated returns through bitcoin investments. The prosecution stated that Bhatt played a key role as an aggregator in Gujarat’s bitcoin ecosystem and reportedly used coercive tactics, including kidnapping, to further his fraudulent operations.
The Supreme Court has previously highlighted the lack of regulation in India’s cryptocurrency sector. On May 5, the court again raised concerns about the absence of a clear legal framework, comparing bitcoin transactions to hawala dealings. The defense argued that the Supreme Court’s 2020 ruling, which struck down an RBI circular banning banks from handling cryptocurrency transactions, effectively legitimized crypto trading and weakened the charges against the accused. The case also calls for the dismissal of multiple FIRs filed nationwide, alleging that Bhatt defrauded investors.
Since introducing a 2019 draft bill that proposed banning private cryptocurrencies and launching a central bank digital currency, India has yet to establish regulatory clarity for the crypto sector. Although the government did not enact formal legislation, it began taxing crypto assets in 2022, imposing a 30% tax on gains and a 1% TDS. These measures effectively classified cryptocurrencies as speculative assets without 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.
