The Supreme Court of India urged the central government to establish a clear policy on cryptocurrency regulation, citing concerns about its economic impact and likening bitcoin transactions to illegal financial activities. During a bail hearing Monday for a man accused of running unlawful bitcoin trades in Gujarat, a bench comprising Justices Surya Kant and N. Kotiswar Singh raised the issue with Additional Solicitor General Aishwarya Bhati, who appeared on behalf of the Centre. The bench stated:

Why does Centre not come out with a clear cut policy on regulating cryptocurrency? There is a parallel under-market for it and it can affect the economy. By regulating the cryptocurrency, you can keep an eye on the trade.

Justice Kant went further, asserting: “Trading in bitcoin is an illicit trade more or less like a Hawala business.” Bhati responded by stating that she would need to seek instructions from the government before providing a formal position.

The bench made these remarks while reviewing the bail request of Shailesh Babulal Bhatt, who was arrested for allegedly deceiving investors by offering unrealistic returns through bitcoin investments. According to the prosecution, Bhatt was a major aggregator in Gujarat’s bitcoin ecosystem and had reportedly resorted to coercive tactics, including kidnapping, to expand his fraudulent operations.

This is not the first time the Supreme Court has flagged the lack of regulation in India’s cryptocurrency sector. On May 5, the court expressed concern over the absence of a clear legal framework, again comparing bitcoin transactions to hawala operations. The defense argued that a 2020 Supreme Court ruling, which overturned a Reserve Bank of India (RBI) circular banning banks from handling crypto transactions, effectively legitimized cryptocurrency trading and weakened the charges against the accused. The case also seeks to quash multiple FIRs filed nationwide alleging Bhatt defrauded investors.

India’s cryptocurrency regulation remains unresolved since a 2019 draft bill proposed banning private tokens and introducing a central bank digital currency. While no formal law was enacted, the government began taxing crypto in 2022—imposing a 30% gains tax and 1% TDS—treating it as a speculative asset without legal status. Enforcement has increased, with stricter KYC and oversight measures. Regulatory bodies remain divided: SEBI is open to supervising crypto, while the RBI continues to oppose it, citing financial stability concerns.

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