SC Questions Centre’s Delay In Crypto Regulation

The Supreme Court has reportedly questioned the central government’s delay in formulating cryptocurrency regulations, highlighting concerns over its economic implications.

The Apex court said the current taxation of Bitcoin trading profits at 30% implies a form of legal recognition and if it’s already acknowledged that it needs to be regulated, a report by Bar and Bench said.

Cryptocurrency in India falls under virtual digital assets (VDA) and income from transfer of VDAs is subject to a 30% tax rate and additional cess is also applicable.

A Bench, comprising Justices Surya Kant and NK Singh, was hearing a plea related to cryptocurrency and said that the issues should be taken up in consultation with experts. 

The court also said that “no one is suggesting a complete halt to cryptocurrency as that may not be wise for the economy.” 

“…there are new kinds of mechanisms evolving for international trade also. Banning may be shutting your eyes (to) ground reality. But what about regulating it? … We aren’t experts. Experts would examine it, but some steps to regulate it and have an eye on it (are necessary),” the court observed

While addressing to Additional Solicitor General (ASG) Aishwarya Bhati, Justice Kant said that courts have been facing practical challenges while dealing with cryptocurrency cases.

Responding to that, ASG Bhati said that she would seek instructions from the Centre on the matter, the report added. 

The issue is associated with a plea on allegations related to a cryptocurrency fraud spanning multiple states. The litigant before the court was accused of having abducted two employees of Bitconnect in early 2018 and extorted 2,091 Bitcoins, 11,000 Litecoins and INR 14.5 Cr in cash from them to recover losses incurred from his investment in the now-defunct cryptocurrency platform, M/s. Bit Connect Ltd.

Notably, ASG Bhati in the hearing yesterday said that an updated report on the investigation progress as well as on the Centre’s position on cryptocurrency would be submitted by July. 

This comes after the SC on May 5 reportedly said trading in Bitcoin in India is like “dealing with a refined way of Hawala business”. 

Justices Kant and Singh made the remarks while dealing with a bail application of Shailesh Babulal Bhatt who was arrested by the police for alleged illegal Bitcoin trade.

Earlier this month, the court said that the Centre has not come out with a clear regime on regulating virtual currency yet. 

For context, the Bitconnect case dates back to 2022, when a grand jury in San Diego in the US indicted the Bitconnect founder Satish Kumbhani for ‘orchestrating’ a global crypto ponzi scheme. 

Notably, the Centre is re-examining its position on cryptocurrencies amid a global policy shift spurred by the US. It was reported earlier this year that the Centre is taking a second look at the discussion paper on cryptocurrencies which was due for release in September 2024.