In a strong oral observation, the Supreme Court of India has urged the Central Government to consider formulating a clear regulatory framework for cryptocurrencies. While hearing Shailesh Babulal Bhatt v. State of Gujarat & Another on Monday, a Bench of Justices Surya Kant and NK Singh remarked that taxation of cryptocurrencies implies recognition—making it all the more important to regulate them.
“If you can tax it at 30%, also please regulate it as you have recognised it by taxing it,” Justice Surya Kant observed during the hearing, highlighting the inconsistency in the Centre’s current approach.
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The Court was responding to submissions made during a case involving alleged cryptocurrency fraud, where the petitioner is accused of extorting large sums of crypto assets and cash from employees of a now-defunct platform, BitConnect.
Emphasizing that banning cryptocurrency outright may not be economically wise, the Court reiterated that regulatory oversight is essential. It warned that ignoring the presence of cryptocurrencies, which form part of a growing parallel digital economy, would be akin to “shutting your eyes to ground reality.”
“We aren’t experts. Experts would examine it, but some steps to regulate it and have an eye on it are necessary,” the Bench stated, while calling for expert-led policy decisions.
Justice Kant recalled raising the issue two years ago and being told by the then-Attorney General that regulation was not feasible due to the global nature of crypto markets. However, the Bench stressed that the evolving nature of digital trade demands immediate attention from policymakers.
Raising concerns about the lack of a statutory framework, Justice Kant questioned how courts could practically adjudicate cryptocurrency-related cases in the absence of legal definitions or asset classifications.
“Tomorrow, somebody will ask me, you please prove – what is the asset? How are we going to prove it?” he remarked, addressing Additional Solicitor General (ASG) Aishwarya Bhati, who appeared for the Centre.
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ASG Bhati assured the Court that she would seek instructions from the Central Government and update the Court on both the progress of the investigation and the government’s stance on crypto regulation by July.
Although the Court acknowledged the broader implications of cryptocurrency, it clarified that the current case must focus on the petitioner—whose role as either a victim or perpetrator remains unclear. The Bench scheduled the next hearing for May 30 and directed the Central Bureau of Investigation (CBI) to expedite its investigation.
India currently levies a flat 30% tax on cryptocurrency gains, alongside a 1% TDS on transactions, yet no law recognizes crypto as legal tender. Furthermore, losses from crypto cannot be offset against other income—an approach many critics view as harsh and imbalanced.
Despite taxing crypto profits, the lack of regulation means platforms and users remain in a grey zone. The RBI has often warned investors about the risks of digital currencies and is simultaneously piloting its own Central Bank Digital Currency (CBDC)—the Digital Rupee.
This isn’t the first time the Supreme Court has addressed crypto regulation. In a previous hearing, a separate Bench declined to entertain a PIL seeking statutory rules, noting that such matters are for the legislature and executive, not the judiciary.
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Still, the growing number of crypto-related frauds and the complexity of investigations—like the one involving Bhatt—are bringing pressure on the government to act decisively.
As the world races to regulate digital currencies, India now faces a critical moment: whether to lead with clarity or continue taxing without taming.
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