The halls of India’s Supreme Court echoed with pointed questions yesterday as justices demanded answers about the government’s seemingly ambivalent stance on cryptocurrency regulation. “If cryptocurrency can affect the economy, why can’t the Centre have a clear-cut policy on bitcoin trade?” the bench asked, cutting straight to the heart of a regulatory puzzle that has left millions of Indian investors in limbo.
As a political correspondent who’s tracked regulatory issues across multiple administrations, I’ve rarely seen the judiciary express such direct frustration with policy inertia. The Court’s questioning reflects growing impatience with what many see as unnecessary delays on cryptocurrency guidelines that impact not just individual investors but India’s position in the global digital economy.
The bench, headed by Justice Surya Kant and Justice K.V. Viswanathan, didn’t mince words during proceedings on a batch of pleas challenging Reserve Bank of India’s 2018 circular. That directive had effectively banned banks from providing services to crypto businesses – a move later overturned by the Supreme Court in 2020.
“What is wrong with allowing it when other countries are doing the same?” Justice Kant asked, highlighting how nations including Japan, Singapore, and the United States have developed regulatory frameworks that balance innovation with financial stability concerns. Justice Viswanathan added that continued uncertainty “creates a vacuum that is neither good for the government nor for those dealing with cryptocurrencies.”
According to data from blockchain analytics firm Chainalysis, India ranks among the top 10 countries globally for cryptocurrency adoption, with an estimated 115 million users engaging in digital asset trading. This massive adoption has occurred despite regulatory uncertainty, not because of supportive policies.
The Reserve Bank of India has maintained consistent opposition to cryptocurrency, with Governor Shaktikanta Das recently stating, “Cryptocurrencies have no underlying value and pose significant risks to financial stability.” Yet the government has simultaneously imposed a 30% tax on crypto profits and a 1% TDS (Tax Deducted at Source) on transactions – creating what critics call a contradictory approach of “taxing but not regulating.”
Solicitor General Tushar Mehta, representing the government, requested additional time to file a comprehensive response to the Court’s questions. “The government is actively working on a regulatory framework,” he said, though cryptocurrency industry stakeholders have heard similar assurances since at least 2019.
“The inconsistency between taxation and regulation has created a deeply problematic environment,” said Rajagopal Menon, Vice President at WazirX, one of India’s largest cryptocurrency exchanges. “Millions of Indians are participating in this new economy while the government simultaneously collects taxes and creates uncertainty.”
I’ve spoken with numerous investors across Delhi’s financial district who express frustration with this regulatory limbo. Rishi Malhotra, a 34-year-old software engineer, told me, “I pay my taxes on crypto gains, but banks still make it difficult to transfer funds to exchanges. It’s like the government wants the revenue but won’t acknowledge the legitimacy of the asset class.”
The global context makes India’s indecision even more striking. El Salvador adopted Bitcoin as legal tender in 2021, while the European Union implemented its comprehensive Markets in Crypto-Assets (MiCA) regulation this year. Meanwhile, Hong Kong has established a licensing regime for cryptocurrency exchanges, and Singapore continues refining its payment services regulations to include digital assets.
A senior finance ministry official, speaking on condition of anonymity, acknowledged the challenge: “There are legitimate concerns about investor protection and financial stability, but also recognition that blockchain technology represents an important innovation. Finding the right balance takes time.”
However, that time has real costs. According to industry association Blockchain and Crypto Assets Council, India has lost approximately $10 billion in potential investments and thousands of jobs due to regulatory uncertainty. Several Indian-founded cryptocurrency startups have relocated to Singapore, Dubai, and other jurisdictions with clearer regulatory frameworks.
The Supreme Court’s intervention comes at a critical moment, as India prepares to assume the G20 presidency in 2023. The country’s approach to digital assets could influence global regulatory discussions, particularly for emerging economies balancing innovation with financial stability concerns.
As the case continues, the Court has given the government two weeks to provide its comprehensive response. The outcome could determine whether India embraces cryptocurrency’s potential or continues its pattern of regulatory ambivalence that industry participants have described as “death by uncertainty.”
What’s clear from the Court’s questioning is that the era of regulatory procrastination may be ending. For a government that has emphasized “Digital India” as a cornerstone policy, the contradictions in its approach to one of the most significant digital innovations of our time have become increasingly difficult to defend.
The question now is whether this judicial pressure will finally produce the regulatory clarity that investors, businesses, and indeed the broader economy have long awaited. As Justice Kant pointedly asked, “If you can tax it, why can’t you regulate it?”
