Urgent regulation of cryptocurrencies and digital assets advocated by India's Supreme Court
The Supreme Court of India has expressed concern over the lack of regulation in the cryptocurrency sector, stating that prohibiting cryptocurrencies would be ineffective and may lead to unsupervised activities, pushing the market into the shadows. The court is concerned that the lack of regulation allows for illicit activities and scams, as well as hindering consumer protection and financial stability of the country.
Currently, cryptocurrency regulation in India remains evolving but incomplete. The Indian government imposes a 30% tax on crypto gains, a 1% TDS (Tax Deducted at Source) on transactions, and has started multi-agency oversight involving SEBI, RBI, and the Finance Ministry for crypto tokens that resemble securities. However, cryptocurrencies are not recognized as legal tender, and their legal status remains in a regulatory grey area with no comprehensive, binding legislation yet passed.
Significant steps include government plans to release a discussion paper in June 2025 inviting public consultation and seeking to establish a clearer regulatory framework, expected to align more closely with global standards such as the EU’s MiCA regulation. Additionally, a model crypto law called the COINS Act has been proposed by industry advisory groups; it suggests creating a dedicated Crypto Assets Regulatory Authority (CARA) to oversee crypto activities, improve transparency, and address issues like punitive taxation and regulatory uncertainty.
However, continued inaction or delayed formalization of a comprehensive legal framework could have potential consequences. Regulatory uncertainty discourages innovation, adoption, and investment in the crypto space within India. It increases the risk of scams, hacks, and fraud, as evidenced by multiple high-profile exchange breaches and rising crypto thefts. Difficulties in protecting investors and enforcing anti-money laundering standards without clear laws persist. Ongoing challenges for tax authorities to properly track, assess, and collect due taxes could lead to increased non-compliance or evasion, hampering government revenues.
India potentially falls behind other countries that have clearer and more supportive regulatory environments, missing opportunities in the growing global digital asset ecosystem. Nations like Switzerland and Singapore have established clear policies that allow companies to operate safely and users to protect their assets and data. These nations have seen their fintech sector grow thanks to a predictable and well-structured legal environment.
The court emphasizes that cryptocurrencies are transforming traditional finance and offering new opportunities. Appropriate regulation can foster innovation, economic growth, and the creation of specialized jobs in the digital economy. The Supreme Court urges the government to clearly define the rules of the game in the cryptocurrency market to avoid significant economic losses and a permanent loss of competitiveness in the global market for digital assets and blockchain.
Investing in the cryptocurrency sector requires clarity in the rules, as the lack of comprehensive regulation in India increases the risk of illicit activities, scams, and hinders financial stability. Embracing technology such as cryptocurrencies can lead to economic growth and job creation, but appropriate regulation is necessary to ensure safety, consumer protection, and adherence to anti-money laundering standards, aligning with global financial standards.
