New Delhi – In a sharp rebuke to the central government, India’s Supreme Court has compared unregulated Bitcoin trading to a “refined form of Hawala,” calling out the glaring lack of regulatory clarity in the country’s approach to cryptocurrency.
The comments were made during a bail hearing for Shailesh Babulal Bhatt, an accused in a Bitcoin-related case who has been in custody since August 2023. A two-judge bench, comprising Justices Surya Kant and N Kotiswar Singh, expressed concern over the Centre’s prolonged delay in formulating a regulatory framework for virtual currencies—despite repeated judicial urgings over the past two years.
Referring to the opaque nature of crypto transactions, Justice Kant remarked that the current environment allows for potential abuse and compared it to traditional money laundering systems like Hawala. “There is a complete vacuum when it comes to the legal stance on cryptocurrency in India,” the bench noted, while directing the Gujarat government and the Enforcement Directorate to respond to the bail plea within ten days. The case will be heard again on May 19.
A Pattern of Inaction
This is not the first time the apex court has raised alarms over the government’s sluggish pace on crypto policy. As far back as February 2022, the court had urged the Centre to clarify whether cryptocurrency trading was legal and to provide a roadmap for enforcement. Despite this, no concrete legislation has been enacted.
In January 2024, the government told the court it was still deliberating on the matter. On Monday, Additional Solicitor General Aishwarya Bhati stated that Bhatt’s case went beyond Bitcoin trading and warranted a comprehensive counter-affidavit. But the bench emphasized that the broader issue was the legal vacuum—not just the details of a single case.
While senior advocate Mukul Rohatgi argued that the Reserve Bank of India’s 2018 circular banning crypto had been quashed by the court in 2020—meaning his client hadn’t violated any law—Justice Kant reiterated that the lack of formal rules made the ecosystem ripe for misuse.
Legal Grey Area, Rising Adoption
Despite the fact that digital assets are not specifically prohibited in India, the lack of thorough regulation has caused misunderstandings and uneven enforcement. Since the Prevention of Money Laundering Act (PMLA) was introduced in March 2023, platforms such as Binance and Coinbase have registered with the Financial Intelligence Unit (FIU).
There is currently no comprehensive legislation, nevertheless, except from adherence to taxation and anti-money laundering regulations. The government told Parliament in December 2024 that there was no set timetable for enacting regulations specifically pertaining to cryptocurrency.
Booming Interest in Smaller Cities
While policymakers stall, the Indian public—particularly in smaller cities—is embracing crypto. With job growth lagging and inflation biting, many young Indians are turning to digital assets for investment and additional income.
Reuters recently profiled Ashish Nagose, a 28-year-old flower shop owner in Nagpur, who shifted from equities to crypto trading. His story reflects a broader trend: trading volumes on India’s top four crypto exchanges doubled to $1.9 billion in Q4 2024, driven largely by users in tier-2 cities such as Jaipur, Pune, and Lucknow.
According to CoinSwitch, seven of the top ten crypto-active cities in 2024 were non-metropolitan hubs, highlighting a decentralized shift in investor interest.
Caution Amid a Surge
Despite this grassroots momentum, the Indian government remains hesitant. Even in the face of heavy taxation and policy uncertainty, millions of Indians are embracing crypto—seeing it not just as an asset class, but as a gateway to financial empowerment.
The Supreme Court’s latest comments underscore a growing disconnect: while the people move forward, the policymakers continue to delay. Whether this latest judicial prod will finally spark action remains to be seen.
