India’s Supreme Court has recently expressed concerns over unregulated Bitcoin trading, likening it to a refined form of Hawala during a recent bail hearing in a crypto-related case. The court raised these concerns as it questioned the absence of a clear regulatory framework for virtual currencies in the country, leading to potential misuse and uncertainty.
The remarks were made during the bail plea hearing of Shailesh Babulal Bhatt, who has been in custody since August 2023 for allegedly engaging in illegal Bitcoin trading. Bhatt’s lawyer, senior advocate Mukul Rohatgi, argued that Bitcoin trading is not illegal in India, especially after the apex court’s 2020 ruling that struck down the Reserve Bank of India’s ban on banking services for crypto platforms.
Justice Surya Kant expressed his limited understanding of Bitcoin but highlighted that without regulation, Bitcoin trading closely resembles “a refined way of Hawala,” an informal and often illegal money transfer system that operates outside traditional banking channels.
The Supreme Court bench noted that this issue had been brought before the court previously, with a similar case two years ago prompting the court to ask the Centre to clarify its policy on virtual currencies. However, there has been little progress on this front, leaving the judiciary in a challenging position when dealing with such matters.
Despite the ongoing uncertainty, India has taken steps towards oversight of virtual digital assets. A tax regime introduced in 2022 imposes a 30% tax on crypto profits and a 1% tax deducted at source on transactions above a certain threshold. Additionally, virtual asset transactions were brought under the Prevention of Money Laundering Act in March 2023, with many platforms registering with India’s Financial Intelligence Unit to comply with local rules.
However, a comprehensive regulatory framework for virtual assets is still lacking. In a response to Parliament in December 2024, the government stated that there is currently “no fixed timeline” for introducing comprehensive rules on virtual assets.
Ajay Seth, Secretary of the Department of Economic Affairs, addressed the delay in releasing a cryptocurrency discussion paper during a recent policy roundtable, citing the need to reassess India’s approach in light of global policy shifts. With major economies like the U.S. reevaluating their stance on crypto, India too will need to recalibrate its approach.
In conclusion, the Supreme Court’s concerns over unregulated Bitcoin trading and the absence of a clear regulatory framework highlight the need for comprehensive rules and oversight in the virtual asset space in India. Despite some steps taken towards taxation and compliance, a broader regulatory framework is essential to address potential misuse and uncertainty in the crypto market.