New Delhi: The Supreme Court on Monday said banning cryptocurrency may not be the wise step – will be like shutting eyes from the ground reality – instead the government should ponder on developing a mechanism for regulating cryptocurrency.
The matter came up for hearing before a bench comprising justices Surya Kant and N Kotiswar Singh. The bench was hearing a bail petition filed by Gujarat resident Shailesh Babulal Bhatt, who has been accused of cryptocurrency-related fraud across multiple states. Senior advocate Siddhartha Dave and advocate Mohit D Ram represented Bhatt and additional solicitor general Aishwarya Bhati represented the Enforcement Directorate.
During the hearing on the bail plea, which is not connected with the broader policy matters, the apex court stressed that the government should develop some regulation regarding cryptocurrency, and also queried the Enforcement Directorate, saying what was the need to arrest the petitioner after completion of its probe. The bench was informed that the central agency had not arrested the petitioner while its investigation was ongoing.
Justice Kant recalled that a few years ago he had called upon the Attorney General of India asking, is the government doing something on cryptocurrency? “Nobody says you stop it (cryptocurrency). Stopping may not be a wise step for the economy because new kinds of mechanisms are evolving even for international trade. Banning will be like something shutting your eyes from the ground reality but what about regulating”, said Justice Kant.
Bhati said from the reading of the newspaper reports she gets that it is not an asset but she would have to get instructions in the matter, as she does not have instruction today to address the court's query. “Tomorrow, somebody will ask you to prove what this asset is. How are you going to prove? It is not displayed on the exchange, what is the rate or anything. It is all internally”, said Justice Kant.
Justice Kant said “now this cryptocurrency is a complete parallel under market…this currency is a parameter to assess the wealth of a person…is it going to be a threat to the economy? We do not know. We are not experts. But some steps regulatory (are required)…”.
Dave and Ram submitted that in a lot of countries it is legitimate and it is traded properly on the exchanges. Bhati said in the instant case, 50% Bitcoins are being used in the dark web. “In Bitcoin trading, if you are earning a profit then probably 30% tax is also being imposed. So, in that way you are recognizing them, if you recognize them then you can regulate them….”, observed Justice Kant. Bhati said she will file an affidavit explaining what is the regulatory mechanism.
The bench observed that it is difficult to understand from the file whether the petitioner is the victim or victimizer. Bhati said in this case there is one FIR by people who were victims, they were promised good returns in the Bitcoin business, and the petitioner was also one of those victims, who later went into extortion and extorted 300 Bitcoins from these people.
Bhati claimed that the petitioner is the biggest aggregator of the Bitcoins from the company which was victimizing others.
Dave said there are two FIRs registered by his client and there are two FIRs registered against him, and there is no chargesheet in the predicate offence. Dave said the investigation has been going on for 6 years, the ECIR was registered in December 2019, and his client was arrested in August 2024.
After hearing submissions, the bench asked the investigation to be completed within 10 days and scheduled the matter for further hearing on May 30.
Currently, India imposes a flat 30% tax on profits from cryptocurrency transactions and a 1% tax deducted at source on every trade. However, cryptocurrencies such as Bitcoin and Ethereum are neither recognised as legal tender nor banned outright.
