Supreme Court Questions Government on Lack of Cryptocurrency Regulation

The Supreme Court of India has called on the central government to explain its inaction on regulating cryptocurrencies, highlighting the risks posed by unregulated trading. As justices urged the need for oversight to prevent misuse, a bail hearing for accused fraudster Shailesh Babulal Bhatt raised concerns about the enforcement of existing laws. The Court’s remarks underscore a pressing need for clarity and regulation in the cryptocurrency space amid growing public interest and financial implications.

The Supreme Court of India is putting the central government on the spot, asking why it hasn’t moved to regulate cryptocurrencies, which have been gaining explosive attention. This comes from a session on Monday where the justices expressed concern about the current vacuum of legal guidelines on these digital assets. The ongoing situation, they argued, makes it easy for abuse and fraud to flourish, creating a worrying ecosystem.

During the session, Justices Surya Kant and N Kotiswar Singh were considering a bail petition from Shailesh Babulal Bhatt, a Gujarat man accused of cryptocurrency fraud. While the case hinges on Bhatt’s personal legal woes, the judges emphasized how the larger regulatory picture is crucial. They pointed to the fact that the Enforcement Directorate had arrested Bhatt post-investigation, raising eyebrows about their legal strategy.

Justices Kant and Singh didn’t mince words while stressing that nearly two years had passed since the court asked for a clear policy on virtual currencies. They cautioned against an outright ban, noting that while it’s clear cryptocurrencies shouldn’t be treated as illegal, some form of regulatory framework is essential. The absence of such a framework, the justices said, is tantamount to ignoring a pressing need for oversight.

The justices elaborated that merely declaring cryptocurrencies illegal or banning them won’t resolve the practical issues. They pointed out the complexities inherent to crypto trading, emphasizing the importance of regulation—even amid the volatility that characterizes digital currencies. “If tomorrow somebody asks, ‘Prove what is this asset, how are we going to prove it?’,” the bench inquired, clearly skeptical about the current setup.

On the other side, Bhatt’s advocate Mukul Rohatgi argued that Bitcoin, in particular, is not illegal under Indian law, following a Supreme Court ruling in 2020. He claimed that the arrest lacked justification in the absence of a ban. Currently, India does tax cryptocurrency transactions at 30% on profits and 1% TDS, but there remains a confusing legal landscape where these currencies are neither fully recognized nor outright prohibited.

The Reserve Bank of India continues to issue warnings about the potential risks of investing in cryptocurrencies. This juxtaposes sharply with its own push for the Digital Rupee, which it sees as a step into modern finance. Meanwhile, a draft bill proposed in 2021 to regulate these assets has yet to see the light of day in Parliament.

Moreover, in July 2023, another bench pressed the government for clarity on whether it intends to create a federal agency for cryptocurrency criminal investigations. They bemoaned the lack of dedicated legal frameworks or investigative bodies as “unfortunate.”

As the situation evolves, it’s clear that the need for regulation in the cryptocurrency sphere is becoming not just a judicial concern but a societal one as well. With the potential for financial innovation on the line, the question remains: will the government finally step in?

In summary, the Supreme Court is challenging the Indian government over its lack of regulation regarding cryptocurrencies, which the Court argues has allowed misuse to flourish. The justices have called for a regulatory framework, warning that ignoring this issue serves only to complicate the legal landscape further. As the legal and financial implications evolve, it will be crucial to see how the government responds to this growing concern.

Original Source: www.hindustantimes.com