Supreme Court calls Bitcoin trade in India 'refined hawala business'

The Supreme Court of India has expressed strong concerns over the absence of a clear regulatory framework for cryptocurrency trade in the country. On March 5, a bench comprising Justices Surya Kant and N. Kotiswar Singh criticized the Centre for failing to provide a clear policy on cryptocurrencies. The bench remarked that trading in Bitcoin is akin to "dealing with a refined way of Hawala business," reflecting the court's frustration over the lack of regulations that would govern virtual currency transactions in India. The statement came during the hearing of a bail application filed by Shailesh Babulal Bhatt, who was arrested by police for alleged illegal Bitcoin trading.

Two years prior, the Supreme Court had asked the Centre to inform the court about the policy framework regarding virtual currency trade. However, the government has not yet provided any formal response. The issue gained significance after the Reserve Bank of India (RBI) circular restricting cryptocurrency transactions was quashed by the top court. Despite this ruling, the absence of a comprehensive regulatory mechanism has left room for uncertainties regarding the legality of Bitcoin trade in the country.

During the hearing, senior advocate Mukul Rohatgi, representing Bhatt, argued that Bitcoin trading is not illegal in India. He highlighted that the RBI’s circular was overturned by the Supreme Court, making Bitcoin trade permissible. Rohatgi also pointed out the significant value of Bitcoin, noting that it had reached ₹82 lakh per coin at the time of the hearing. However, the court stressed that without clear regulations, such trading remains problematic, as it could potentially facilitate illicit activities.

The Gujarat government and the Enforcement Directorate (ED), represented by Additional Solicitor General Aishwarya Bhati, requested more time to file a detailed counter to the bail application. The agencies stated that the case involves more than just Bitcoin trade and concerns broader issues related to alleged financial crimes. As a result, the court granted a 10-day period for the authorities to submit their responses, with a hearing scheduled for May 19, 2025.

This case is a part of the broader issue surrounding cryptocurrency regulation in India. The Centre has been under pressure to establish a clear policy to regulate digital currencies and to provide a legal framework for investigations into cryptocurrency-related offenses. In January 2024, the government informed the court that it had yet to finalize a mechanism to regulate cryptocurrencies. The ongoing case further underscores the urgency for a well-defined approach to address the challenges posed by the growing cryptocurrency market.