The Supreme Court of India has raised concerns over the absence of a comprehensive regulatory framework for cryptocurrencies, particularly in light of the increasing number of fraud cases involving digital assets across various states.
According to a Bar and Bench report, a bench comprising Justice Surya Kant and Justice NK Singh emphasised the importance of expert consultation in addressing the regulatory gap within the crypto sector. The matter came up during a hearing related to a widespread crypto fraud case, which has been referred to the Central Bureau of Investigation (CBI) for completion of the probe by May 30.
Highlighting the difficulty of handling crypto-related legal matters without a clear regulatory structure, Justice Kant reportedly told Additional Solicitor General (ASG) Aishwarya Bhati that courts are struggling to determine whether individuals involved in such cases are victims or perpetrators. ASG Bhati informed the bench that the government's position on cryptocurrency regulation will be submitted by July.
Although India has made gradual progress in regulating the crypto space since 2022, the Supreme Court has previously rejected petitions calling for clearer oversight. In one notable case in November 2023, a bench led by then Chief Justice D.Y. Chandrachud dismissed a plea seeking regulatory guidelines, criticising the petitioner for using the request to seek bail.
Currently, India imposes a 30% tax on profits from crypto assets, along with a 1% Tax Deducted at Source (TDS) on all crypto transactions to establish traceability in a largely anonymous ecosystem. Moreover, crypto firms operating in the country are required to comply with anti-money laundering protocols, perform Know Your Customer (KYC) checks, and register with the Financial Intelligence Unit (FIU) to operate legally.
Looking ahead, a discussion paper from the finance ministry is expected to clarify the government's stance on virtual digital assets. In February, RBI Governor Sanjay Malhotra indicated that the paper would offer a more definitive policy direction. Economic Affairs Secretary Ajay Seth also stated in July 2024 that the document would play a critical role in shaping the future of crypto regulation in India.
Finance Minister Nirmala Sitharaman has previously maintained that cryptocurrencies cannot be treated as legal tender. Similarly, former RBI Governor Shaktikanta Das has voiced concerns about the risks associated with digital currencies. However, the RBI’s 2024 Financial Stability Report acknowledged the growing global adoption of blockchain technology and its potential impact on the broader financial ecosystem.