The Supreme Court of India has issued a scathing criticism of the inertia of the central government in the regulation of cryptocurrencies. The judicial authority of Apex of India warned that the lack of a legal framework has created a mature ecosystem for misuse and financial fraud. The Supreme Court, on May 19, 2025, compared the unregulated cryptographic trade to a more sophisticated version of Hawala, a centenary informal money transfer system often used to wash illicit funds.
A bank that includes Judges Surya Kant and N Kotiswar Singh made the comments to hear a bail request for Shailesh Babulal Bhatt, a Gujarat headquarters in Gujarat accused in a case of cryptocurrency fraud of several states. Although the hearing was procedural, the court took the opportunity to issue a broader warning about the void in the Indian digital asset policy.
“Nobody says it stops it … prohibiting can be closing the eyes to the reality of the ground. But what is there to regulate it?” The Bank questioned, underlining the Government’s position paradox, where cryptography is not legal or forbidden, but very taxed.
The Court repeats the demand for regulatory clarity
The court reminded the government of the Union that he had already requested a policy address on digital currencies almost two years ago and expressed his dismay that the situation remains unchanged. Judge Kant said that India cannot afford to make a “look” to the evolution of global financial technologies and must find a midpoint between prohibition and permissiveness.
Bank’s comments called great attention to the ongoing ambiguity surrounding the legal status of digital assets in India. Although the profits of cryptocurrency transactions are taxed at 30%, with a 1% TDS applied by operation, there is no formal law to govern the issuance, trade or investigation of activities related to cryptocurrencies.
The additional general lawyer Aisehwarya Bhati, who represents the government, requested time to obtain instructions, but the tone of the Court reflected a growing judicial impatience. He also raised concerns about probative and application challenges, noting that the police can be left without equipping in the absence of formal definitions and procedures.
“If tomorrow someone asks: ‘Show this active’, how are we going to try it?” The bank asked. “We are not experts. Experts will have to examine it, but some steps to regulate are necessary.”
Legal Ambiguity Clouds Application
The main lawyer Mukul Rohatgi, arguing for Bhatt, said that the Supreme Court had demolished in 2020 a circular of the Bank of the Reserve of India (RBI) that had effectively prohibited banks to facilitate cryptographic transactions. He argued that, in the absence of a legislative prohibition, Bhatt’s arrest was “unjustified”, especially after the compliance address (ed) completed his investigation without taking measures during the investigation phase.
The court echoed this concern, consulting the logic of arresting Bhatt after the investigation while raising alarms on the inconsistent application of the application of the law in the cryptographic space.
Bhatt’s case has revived the debate on the criminalization of cryptography trade under the current legal regime of India. His case is one of several recent investigations of fraud with high profile crypt in Indian states, where the agencies of application of the law fight to navigate a complex legal and technological environment.
Global regulatory progress highlights India’s delay
Indian hesitation contrasts with other economies that have advanced with legislative and regulatory measures. The Mica framework of the European Union (markets in cryptographic assets), which enters into force in 2025, provides comprehensive rules for the issuance of cryptographic, stable and service providers. In the United States, the SEC and the CFTC are increasingly defining jurisdictional lines and means of application for digital assets, although through legal legal challenges and guidance.
In India, however, the draft of the cryptocurrency and the regulation of the official digital currency bill, first prepared in 2021, has not yet been introduced in Parliament. Despite several discussions, policy and public consultations documents, the bill remains in limbo: leaving cryptographic exchanges, investors, forces of the order and the judiciary that sails through a gray area.
Regulatory limbo undergoes industry and supervision
The industry itself has become increasingly vocal about the need for clarity. The cryptographic sector of India, once again active worldwide, has seen a migration of companies and talent to jurisdictions such as Dubai and Singapore. Exchanges such as Coindcx and Wazirx continue to operate nationwide, but face strict charges of compliance without a framework based on the rights that accompany it.
At the same time, the government has emphasized the risks of cryptographic trade. The RBI, under Governor Shaktikanta Das, has repeatedly marked volatility, investor protection concerns and possible threats to macroeconomic stability. India’s flagship digital rupe, launched as a digital currency of the Central Bank (CBDC), is being promoted as a safer alternative and backed by the State to decentralized tokens such as Bitcoin and Ethereum.
However, the dichotomy remains unsolved: the State imposes aggressive digital assets and warns of their use, but refuses to legally define them or provide investor protections.
Past judicial pressure and the need for a federal cryptography agency
This is not the first time that the Supreme Court pressed the government who more clarity. In July 2023, another bank ordered the center to explain whether to create a federal agency dedicated to investigate crimes related to cryptography. He called the lack of a regulatory framework and an “unfortunate” application authority, especially in the midst of increasing cases of cyber fraud, money laundering and illicit trade that involves digital assets.
More than 90,000 cases of cyber crimes were recorded in India in 2023, according to the National Crime Registries Office, and a growing percentage of them involve cryptographic elements. However, agencies such as cyber units of ED, CBI and state must operate without uniform procedures or technological abilities.
What happens later?
With the latest comments from the Supreme Court, the pressure is increasing once again on the union government to act decisively. The possibility that cryptographic legislation occurs during the Parliament Monzón session is now widely speculated.
For investors and new companies in the sector, the lack of clarity remains a deterrent element for capital and innovation entries. Legal experts suggest that until an integral law is introduced, both courts and compliance agencies will continue to deal with inconsistencies, which endangers both the delivery of justice and market confidence.
As the world runs forward with the regulation of digital finance, India is at a crossroads. The warning of the Supreme Court can be a turning point, or simply another reminder lost in bureaucratic inertia.
Read also: FTX to distribute more than $ 5 billion to creditors in the second payment round as of May 30, 2025
Discharge of responsibility: The information provided in Alexablockchain is only for informative purposes and does not constitute financial advice. Read the discharge of complete responsibility here.
Image credits: Canvas
