Cryptocurrency—such as Bitcoin, Ethereum, and USDT—has been a hot topic in India over the past few years. With its growing popularity and rising investments, both the government and judiciary have been forced to take it seriously. On May 21, 2025, the Supreme Court of India made a critical observation about crypto that could shape its future regulation in the country.
What Did the Supreme Court Say? The apex court likened cryptocurrency trading—especially involving Bitcoin—to a "sophisticated form of hawala." The bench expressed concerns that the current structure of crypto trading lacks transparency and may be misused for illegal activities like money laundering and unregulated financial transfers. This comment came while hearing a petition urging the central government to establish a formal regulatory framework for crypto assets.
What Was the Petition About? A Public Interest Litigation (PIL) had requested that the Union Government implement clear policies and a monitoring system for cryptocurrencies. Petitioners argued that the lack of regulation in India has created space for fraud, manipulation, and investor confusion, and that investors are being exposed to significant financial risks.
How Did the Supreme Court Respond? The Court dismissed the petition but emphasized that policy-making is the prerogative of the executive and legislative branches—not the judiciary. It stated:
“This is a matter of policy. The court cannot direct the government on when and how to regulate.”
However, the Court did urge the central government to treat the issue with urgency and consider drafting a regulatory framework to prevent misuse of these digital assets.
The Government’s Current Position: India has already taken some preliminary steps toward crypto regulation. The 2022–23 Union Budget introduced a 30% tax on income from digital assets, and virtual digital assets (VDAs) were officially recognized as a category. Still, there is no comprehensive law or regulatory authority dedicated specifically to cryptocurrencies. The government has said it aims to work on global cooperation to form consistent rules.
Is the Supreme Court Hinting at a Crypto Ban? No, the Court did not suggest banning crypto. Its remarks highlighted the urgent need for regulation, not prohibition. Comparing crypto trading to hawala was a way to point out the unregulated nature of these transactions, which can easily be exploited. The key takeaway is the need for structured oversight.
How Did the Crypto Industry React? India’s cryptocurrency exchanges and Web3 startups welcomed the Court’s remarks. Many saw this as an opportunity to push for clarity in regulations, which they argue will benefit both users and the economy. Clear rules would protect consumers, reduce fraud, and attract international investments.
What Does This Mean for Everyday Investors? If you're already invested in crypto, you might be wondering whether your assets are at risk. For now, there's no ban or legal change that impacts individual traders. However, it's possible that in the near future, stricter Know Your Customer (KYC), Anti-Money Laundering (AML), and reporting measures may be enforced.
Is Crypto Legal in India? This remains a gray area. Cryptocurrencies are not recognized as legal tender, meaning you can't use Bitcoin or Ethereum to pay for goods and services like the rupee. However, trading is not banned either. You can buy, hold, and sell crypto, but the risks involved are yours alone.
How Are Other Countries Handling Crypto? India isn’t the only nation grappling with this challenge. The U.S., European Union, Japan, and others are also exploring regulatory frameworks. Some have already implemented detailed crypto laws, while others are still evaluating the economic and social implications. India appears to be leaning toward regulation rather than prohibition.
Conclusion: The Supreme Court’s remarks on May 21, 2025, underscore the urgent need for India to formalize its stance on cryptocurrency. While the Court refrained from issuing directives, its comments serve as a nudge to the government to enact a clear and effective regulatory structure. For investors and businesses, the time to prepare is now, as the crypto landscape in India is likely to undergo significant transformation in the coming months.
