Supreme Court Backs Crypto Regulation in India Over Ban: Why?

Supreme Court Urges Government to Set Clear Crypto Regulation in India

On Monday, the Supreme Court of India sharply questioned the government for not setting up proper rules to control cryptocurrency activities, according to Hindustan Times. A bench led by Justices Surya Kant and N Kotiswar Singh said the delay has led to many frauds and legal confusion. They gave these remarks while hearing the bail request of Shailesh Babulal Bhatt, who is facing scam charges across multiple states.

Although the case was about bail, the Court raised a bigger issue—why has the Centre not introduced any law for digital assets yet? Almost two years ago, the Court had asked the Union government to bring clarity on crypto, but nothing has happened.

Crypto Ban or Crypto Regulation: What’s the Right Move?

The Supreme Court made it clear that banning cryptocurrency is not the right solution. According to the bench, banning it would be like "shutting eyes to reality." The Court added that cryptocurrencies, especially Bitcoin, are being used like a modern version of Hawala due to a lack of monitoring.

Senior lawyer Mukul Rohatgi, who is defending Bhatt, said trading digital assets is not illegal in India. He pointed to the 2020 Supreme Court ruling that lifted the RBI's ban on transactions through banks. Since then, there’s no official ban, yet no clear legal approval either.

Even today, cryptocurrency is not considered legal tender in India. However, it’s not banned either. Instead, the government has put taxes in place:

• 30% tax on all profits from crypto transactions.
  

• 1% TDS (Tax Deducted at Source) on trades above ₹50,000 (₹10,000 in some cases).
  

The Crypto Bill 2021 proposed creating a legal structure. It planned to ban private cryptocurrencies while allowing a government-backed Digital Rupee (CBDC). But the bill was never passed in Parliament.

Why Crypto Rules Are Needed in India

Many believe India urgently needs clear laws for multiple reasons:

• Prevent Financial Crime: Without laws, it's easy for scammers to use digital assets for fraud or illegal deals. Strong rules can support KYC (Know Your Customer) and AML (Anti-Money Laundering).

• Protect Investors: If scams happen, investors have no legal backing. In February 2025, the CBI raided over 60 places in a major GainBitcoin scam. The case involved fake promises of 10% monthly returns and later shifted to a worthless token (MCAP). Several such instances are under investigation and not resolved yet due to lack of clear rules and regulations.

• Support Innovation: Clean regulations will welcome new business and blockchain initiatives to develop in India. It will also prevent tech talent from relocating to cryptocurrency-friendly nations.

• Stabilize the Market: Crypto unregulated can damage the economy as a whole. Clear laws will help prevent risks like massive losses during market crashes.

Risks of No Regulation: What India Is Losing

India is already facing several problems due to a lack of crypto rules:

• Investors get scammed with no legal protection.

• Startups leave India for countries with clear digital assets laws.

• Government loses tax money due to unclear systems.

• Public trust weakens in digital systems.

In September 2024, India’s Financial Intelligence Unit (FIU) even banned access to major offshore exchanges like Binance, Kraken, and KuCoin for not following local rules. This move showed the risks of not having a full legal structure.

What Happens Next?

The Court gave the investigation agency 10 more days to finish its probe in Bhatt’s case and set May 30 as the next hearing date. Meanwhile, it asked the government to take real steps toward setting rules.

Right now, digital assets in India lives in a legal grey zone—taxed, but not recognized or banned. The Court’s message is clear: it's time for the government to stop delaying and bring in proper  regulation.

Conclusion

The Supreme Court has pushed the government to act on rules, not just with taxes but with full legal clarity. The question now isn’t whether to ban or ignore crypto—but how to regulate it to protect citizens and boost innovation safely.