Supreme Court says cryptocurrency needs to be regulated, banning not an option
The Supreme Court of India has made it clear that cryptocurrency should be regulated, not banned. During recent hearings, the bench led by Justices Surya Kant and NK Singh questioned the central government’s prolonged inaction on creating a regulatory framework for digital assets, emphasizing that the absence of clear rules has created fertile ground for misuse and illicit activities.
Regulation Over Ban: The Court stated that no one is proposing a complete halt to cryptocurrency, as banning it outright would be unwise for the economy and akin to “shutting your eyes to ground reality.” Instead, the Court stressed that regulatory measures and oversight are necessary to address the risks associated with cryptocurrencies.
Taxation as Legal Recognition: The bench pointed out that profits from Bitcoin and other virtual digital assets are already taxed at 30%, which implies a degree of legal acknowledgment by the government. The Court questioned why, if such acknowledgment exists, regulation should not follow.
Global Context and Risks: The judges highlighted that, with new financial mechanisms evolving internationally, banning crypto would isolate India from global trends and potentially drive the activity underground, making it harder to monitor and control. Regulation, on the other hand, would allow authorities to oversee the sector and prevent misuse.
Call for Expert Consultation: The Court acknowledged its own limitations in technical expertise and called for policy decisions to be made in consultation with experts in the field.
Practical Challenges: The absence of a legal definition or framework for cryptocurrencies poses evidentiary challenges for law enforcement and the judiciary, especially in cases involving fraud or illegal activities.
The Supreme Court has criticized the government for its delay in formulating a clear policy, noting that nearly two years have passed since it first sought clarity on India’s stance regarding virtual currencies. The Court described the continued lack of regulation as a “deliberate disregard” for a rapidly evolving and significant issue.
Economic Impact: Proper regulation is seen as essential to harness the economic benefits of the crypto sector, such as investment, job creation, and tax revenue, while minimizing risks like fraud and money laundering.
Legal Uncertainty: The lack of clear laws has led to confusion, with some arguing that crypto trading is legal in India, especially after the Supreme Court’s 2020 decision overturning the RBI’s ban on crypto-related banking services.
| Aspect | Supreme Court’s Position |
|---|---|
| Ban on Cryptocurrency | Not advisable; would be shortsighted and ineffective |
| Need for Regulation | Essential for oversight, prevention of misuse, and clarity |
| Taxation of Crypto Profits | Implies legal recognition, supports need for regulation |
| Government’s Delay | Criticized as harmful and unacceptable |
| Consultation with Experts | Necessary for effective policy-making |
| Economic and Legal Concerns | Regulation needed to address risks and seize opportunities |
The Supreme Court of India has firmly stated that banning cryptocurrency is not a viable option and has urged the government to introduce a robust regulatory framework. The Court’s stance reflects a pragmatic approach: acknowledging both the economic potential and the risks of digital assets, and emphasizing that regulation—not prohibition—is the path forward for India
