India's Supreme Court Pushes for Crypto Regulation Over Blanket Ban

India’s Supreme Court has taken a firm stance against the idea of banning cryptocurrencies outright, urging the central government to move swiftly toward regulatory oversight. During a hearing on May 19, 2025, Justices Surya Kant and N. Kotiswar Singh criticized the current policy vacuum, warning that ignoring digital assets amounts to "shutting your eyes to the ground reality."

The court’s comments came amid a bail hearing in the Shailesh Babulal Bhatt case, a high-profile crypto fraud involving over 2,000 Bitcoins, 11,000 Litecoins, and millions of rupees. Bhatt is accused of abducting BitConnect employees in an attempt to recover personal losses, underscoring the legal and technological challenges that courts face in adjudicating such cases.

The justices emphasized that while they are not financial experts, there is a clear need for professional consultation and action. They pointed out the paradox of India's crypto stance: despite lacking formal regulation, the government imposes heavy taxes—30% capital gains and 1% TDS—on crypto transactions. This taxation, the bench noted, amounts to de facto recognition of digital currencies, necessitating accompanying oversight.

Justice Kant voiced concern about the judiciary's lack of tools to evaluate crypto-related evidence, asking, "Tomorrow, somebody will ask me, you please prove – what is the asset? How are we going to prove it?" The court also compared unregulated crypto activity to the hawala system—an underground, informal method of money transfer that is illegal in India.

The Additional Solicitor General, Aishwarya Bhati, assured the bench that she would seek updated guidance from the central government. The court has also asked the Central Bureau of Investigation (CBI) to expedite its probe into the Bhatt case, with an updated report expected by May 30, 2025.

The court’s sharp remarks have renewed public debate over India’s long-stalled crypto policy. As digital assets gain popularity and financial stakes rise, the lack of a coherent legal framework leaves both investors and regulators vulnerable. The Supreme Court’s intervention marks a pivotal moment, pressing the government to either act or risk systemic blind spots in financial governance.

While the broader question of crypto legality will be addressed separately, this hearing has already set a tone: India can no longer afford to treat crypto as an abstract or foreign issue. Regulation—not prohibition—is the path forward.