Supreme Court Flags Absence of Crypto Regulations, Seeks Centre’s Stand by July

In a recent hearing, the Supreme Court of India raised serious concerns over the continued lack of a regulatory framework for cryptocurrencies in the country. A Bench led by Justices Surya Kant and NK Singh emphasized that while a complete ban on digital currencies may not be the best approach economically, India cannot afford to ignore the need for structured oversight.

“We’re not advocating for a blanket ban — that wouldn’t be economically sound,” Justice Kant noted. “But what about regulation?” he questioned, underscoring how global trade dynamics increasingly involve crypto assets. The Bench stressed the importance of remaining aligned with international developments and ensuring that India’s financial system evolves accordingly.

Reflecting on a similar observation made nearly two years ago in another matter, Justice Kant recalled that the then-Attorney General had cited the international nature of cryptocurrencies as a reason for the government’s hesitation. However, the Court pushed back on this, arguing that global complexities shouldn’t delay the creation of a domestic regulatory structure.

“Banning it altogether would be like turning a blind eye to reality,” the Bench observed, adding that regulation and expert oversight are key. “We’re not experts — that’s why we need expert committees to examine and recommend the way forward.”

One of the Court’s notable points was the contradiction between taxing cryptocurrency profits and the absence of regulation. “If we are already taxing Bitcoin earnings at 30%, doesn’t that imply some level of legitimacy? Then why not regulate it?” Justice Kant asked.

He also highlighted the challenges courts face in handling crypto-related cases. “If someone asks me to define or prove what a cryptocurrency asset is — how do we do that? These digital assets pose unique evidentiary problems,” he remarked.

The discussion arose during a case involving allegations of a cryptocurrency scam spanning several Indian states. The petitioner stands accused of kidnapping two employees from the now-defunct crypto firm BitConnect Ltd. in 2018, and forcibly obtaining 2,091 Bitcoins, 11,000 Litecoins, and ₹14.5 crore in cash, allegedly to recover personal investment losses.

Additional Solicitor General Aishwarya Bhati, representing the Centre, informed the Court that she would seek instructions from the government and provide an update on both the progress of the investigation and the status of cryptocurrency regulation.

The Court made it clear that broader policy questions could be addressed separately, but the immediate concern was to ascertain the petitioner’s role in the case. “We first need to determine whether this man is the victim or the perpetrator — the file currently doesn’t make that clear,” the Bench noted.

The matter will next be heard on May 30. The Court has directed the Central Bureau of Investigation (CBI) to expedite its probe and file an updated report before that date.

Senior Advocate Siddhartha Dave, along with Advocates Mohit D Ram, Rajul Shrivastav, and Kishan Dhaiya, represented the petitioner.