India’s Supreme Court Defers Crypto Regulation to Lawmakers

Last Updated on April 19, 2025 by SPN Editor

In a landmark decision on April 16, 2025, India’s Supreme Court declined to intervene in a plea urging the creation of a framework for Crypto Regulation, emphasizing that such matters fall under the purview of legislators. The bench, comprising Justices BR Gavai and Augustine George Masih, dismissed the petition, which cited widespread grievances related to digital currencies across the nation. “We cannot dictate laws,” Justice Gavai remarked, advising petitioners to present their case to the Government of India. This ruling leaves India’s crypto sector in a state of uncertainty while highlighting the global push for cohesive regulation.

India’s Crypto Regulation: Progress and Hurdles

India’s relationship with cryptocurrencies—digital assets secured by cryptography and built on decentralized blockchain networks—has been complex, marked by cautious steps and regulatory gaps:

Early Restrictions: In 2018, the Reserve Bank of India (RBI) barred banks from supporting crypto transactions, citing risks like money laundering. The Supreme Court lifted this ban in 2020, spurring a boom in crypto adoption but leaving no clear rules.

Taxation Measures: Since 2022, India has imposed a 30% tax on crypto profits and a 1% Tax Deducted at Source (TDS) on trades. These steep rates, without allowances for offsetting losses, have pushed over 85% of trading activity to offshore platforms, stifling domestic exchanges.

Anti-Money Laundering Rules: In 2023, crypto platforms were brought under the Prevention of Money Laundering Act (PMLA), requiring robust Know Your Customer (KYC) protocols and reporting to the Financial Intelligence Unit (FIU). This aligns with global standards but burdens smaller firms with compliance costs.

Legislative Delays: The proposed Crypto Regulation of Official Digital Currency Bill, floated in 2021, seeks to regulate digital assets and pave the way for an RBI-backed Central Bank Digital Currency (CBDC). Yet, its delay in Parliament perpetuates uncertainty.

Global Advocacy: India’s 2023 G20 presidency advanced discussions on a unified global Crypto Regulation framework, endorsing the Financial Stability Board’s (FSB) roadmap. Finance Minister Nirmala Sitharaman stressed the need for nations to align domestic policies with international norms to curb illicit activities.

Enforcement Actions: In 2024, India cracked down on non-compliant offshore exchanges like Binance, banning several for PMLA violations. Binance later secured an FIU license, reflecting a shift toward regulated integration of Crypto regulation.

Public Adoption vs. Policy Caution: India leads globally in grassroots crypto adoption, according to Chainalysis’ 2024 report, driven by tech-savvy youth and remittances. However, the RBI remains wary, viewing crypto as a threat to monetary control.

Investor Vulnerabilities: High-profile incidents, such as the ₹2,000 crore WazirX hack in 2024, exposed Crypto regulation gaps. Courts, citing the absence of clear laws, have dismissed related pleas, leaving investors with limited recourse.

CBDC Pilot: The RBI’s Digital Rupee pilot, launched in 2023, signals openness to blockchain technology, but its integration with private cryptocurrencies remains unclear.

Global Perspectives on Crypto Regulation

Worldwide, crypto regulation ranges from progressive to prohibitive, offering insights for India:

European Union: The EU’s Markets in Crypto-Assets (MiCA) framework, implemented in 2023, standardizes rules across member states, mandating licensing, stablecoin reserves, and consumer safeguards. It balances innovation with stability, a potential blueprint for India.

United States: The U.S. lacks a cohesive Crypto regulation and law, with agencies like the SEC and CFTC overseeing assets as securities or commodities. Proposed legislation, such as the Digital Asset Market Structure Bill, aims to clarify oversight but faces delays, echoing India’s legislative inertia.

Singapore: Singapore’s Payment Services Act requires crypto firms to comply with AML/CFT rules, fostering a vibrant blockchain ecosystem. Its clarity attracts global players, unlike India’s ambiguous policies.

Switzerland: Known for its “Crypto Valley,” Switzerland offers tailored Crypto regulations under FINMA, promoting innovation while ensuring financial integrity. This contrasts with India’s high-tax environment.

Japan: Japan treats crypto as legal property, with exchanges regulated by the Financial Services Agency. Its focus on security and transparency supports market growth, a lesson for India’s investor protection needs.

China: A blanket ban on crypto trading and mining has driven businesses to jurisdictions like Hong Kong, highlighting the risks of overly restrictive policies that India must avoid.

United Arab Emirates: The UAE’s proactive stance, with Dubai’s Virtual Assets Regulatory Authority (VARA), positions it as a crypto hub, offering tax incentives and clear guidelines—areas where India lags.

Global Standards: The FATF’s Travel Rule mandates sharing transaction data to prevent illicit flows, a standard India has adopted. The IMF-FSB’s 2023 Synthesis Paper, backed by the G20, calls for coordinated Crypto regulation to address cross-border challenges, particularly in emerging markets.

Lessons and Opportunities for India

India’s crypto ecosystem, fueled by high adoption and tech talent, faces a critical juncture. Global models offer pathways forward:

Clear Frameworks: Singapore and Switzerland show that defined rules attract investment. India’s delayed Crypto Bill must prioritize clarity to retain talent and capital.

Balanced Taxation: Germany’s tax exemptions for long-term crypto holdings contrast with India’s punitive 30% tax, which could be revised to boost domestic participation.

Consumer Safeguards: The EU’s MiCA emphasizes fraud prevention, a priority for India given rising scams and hacks.

Global Integration: India’s G20 role positions it to shape cross-border standards, reducing regulatory arbitrage and enhancing its fintech credentials.

Innovation Support: Japan’s public-private partnerships could inspire India to integrate blockchain into sectors like remittances and supply chains.

Path Ahead

With the RBI piloting a Digital Rupee and global trends favoring regulation over bans, India has a chance to craft a forward-looking crypto policy. The government’s ongoing stakeholder consultations and Finance Ministry’s planned 2025 discussion paper signal progress. By adopting fair taxes, clear rules, and global alignment, India can harness its crypto potential, protect investors, and emerge as a leader in the digital asset space. For now, the Supreme Court’s deferral on Crypto regulation signals the urgency for lawmakers to act decisively.