Author: Srishti Sinha, School of Law, University of Mumbai, Thane sub-campus
To the Point
Digital currency in India has gotten a new legal status. While people are investing in Bitcoin, Ethereum, and other digital currencies every day, the laws that should guide or protect these activities are still missing. The Supreme Court of India, although not directly regulating crypto, has become a key player in the discussion. Back in 2020, India’s top judges handed down a pivotal verdict that liberated digital currency businesses.
They deemed the RBI’s absolute prohibition excessive and contrary to citizens’ freedom to pursue their chosen occupation, as under Article 19(1)(g). But things have changed since then. In 2025, the Court has refused to step I again and create guidelines, saying it’s the government’s job, not the judiciary’s, to make laws. However, judges have expressed serious concern over the lack of regulation, especially after major incidents like the WazirX hack in 2024 where over Rs. 1,900 crore worth of crypto vanished in cyber-attack. The Court warned that trading crypto without rules is like running a parallel “hawala” system, completely unregulated and risky. Although the government taxes crypto profits heavily, 30% capital gains tax plus 1% TDS, it still hasn’t passed a law to control or guide how digital assets should be used or protected. The Supreme Court is clearly saying: we can’t make the law, but someone needs to, fast. This legal vacuum is leaving Indian investors, exchanges, and even the courts stuck in a grey zone, where crypto is taxed but not fully legal or illegal.
Abstract
Cryptocurrency is becoming more and more popular in India, but there is still no clear law to regulate it. While people trade in digital currencies like Bitcoin and Ethereum, the legal system is still catching up. The Supreme Court of India has played a major role in this space, especially since its 2020 decision that struck down the Reserve Bank of India’s ban on banking services for crypto businesses. That judgment gave the industry a big push. However, after recent incidents like the huge WazirX crypto hack in 2024, many people turned to the Supreme Court again, asking it to step in and create rules. But in 2025, the Court made it clear that it cannot make laws, that’s the job of the Parliament and the government. The judges did show concern and said that crypto trading, without proper regulation, is as risky as illegal money transfers like hawala. They called on the government to act quickly and set up a proper legal framework. Even though the government has introduced heavy taxes on crypto profits, there is still no law that defines how these assets should be traded, stored, or protected. This article looks at the latest actions of the Supreme Court, the legal confusion that still exists, and urgent need for clear crypto laws in India.
Use of Legal Jargon
When we talk about cryptocurrency in the legal world, we often come across complicated terms that may sound confusing but have important meanings. For example, when the Supreme Court struck down the RBI’s 2018 circular banning banks from dealing with crypto businesses, it used the term “proportionality”. This means the Court checked whether the RBI’s decision was fair and balanced in relation to the problem it was trying to solve. The Court found that there wasn’t enough evidence to show that crypto was causing real harm, so banning it completely was too extreme. Another term that comes up is “Article 19(1)(g)” of the Indian Constitution, which gives every citizen the right to carry on a profession or trade. The Court said that trading in cryptocurrency is a kind of business, and people have a right to do it unless there’s a very strong reason to stop them. In recent hearings, judges have used the term “hawala”, which is an informal and illegal money transfer system, to describe how unregulated crypto trading could become a parallel financial system outside government control. This is a serious concern because it shows that the judiciary is worried about crypto being used for crime and fraud. Also, terms like “regulatory vacuum” are being used to point out that even though crypto is being taxed, there are no proper laws or rules to manage it. Judges have also mentioned the idea of “separation of powers”, which means that the Court cannot make laws, only the government and Parliament can do that. All these legal terms may sound heavy, but they reflect real issues affecting investors, the government, and the legal system. Understanding these concepts help us see why India’s crypto policy is still incomplete and why legal clarity is urgently needed.
The Proof
The growing confusion around cryptocurrency laws in India is not just based on opinion, there’s real proof showing how unclear and risky the situation has become. One of the biggest examples is the WazirX hack in July 2024, where cybercriminals stole over Rs. 1,900 crore worth of digital assets from Indian users. This incident shook public trust and brought to light how weak the security and legal protections are in the Indian crypto space. After the hack, many people filed petitions in the Supreme Court asking for stronger regulations, but the Court refused to step in and make rules, saying it’s the job of the government. At the same time, the government is collecting a 30% tax on crypto profits and 1% TDS on every transaction, which clearly shows that it recognizes and allows trading in crypto. Yet, there’s still no law that defines how exchanges should operate, how to protect users, or how to track illegal activities like money laundering. Even the judges in the Supreme Court pointed this out. For instance, if money is sent secretly, like some people do in a “hawala system”, it can prove to be a bane for the society. That’s what two judges thought about today’s cryptocurrency trading in May 2025. They warned that if we don’t keep an eye on it, it could become a sneaky way to move money around without anyone noticing. These strong words from the top court show how serious the issue has become. The lack of rules, combined with increasing cybercrimes, financial frauds, and investor confusion, is clear proof that India needs a proper legal framework for cryptocurrency. Without it, people are left trading in risky conditions, and the legal system struggles to protect them.
Case Laws
Internet and Mobile Association of India v. Reserve Bank of India (2020)
Citation: (2020) 10 SCC 274
This is the most important crypto-related case in India. The Supreme Court struck down the RBI’s 2018 circular that had banned banks from dealing with crypto businesses. The Court said the ban was unfair and violated people’s rights to do business under Article 19(1)(g) of the Constitution. Furthermore, it highlighted that the RBI didn’t have strong evidence that digital currency was hurting the country’s economy.
K.S. Puttaswamy v. Union of India (2017)
Citation: (2017) 10 SCC 1
While not directly about crypto, this case is important because it confirmed that the right to privacy is a fundamental right under the Constitution. Since cryptocurrency deals with digital wallets and private data, this ruling is often used to support arguments about protecting user data and financial privacy in digital transactions.
State of Maharashtra v. Lok Shikshan Sansthan (2021)
Citation: (2021) SCC OnLine SC 333
This case explained the idea of “regulatory vacuum”, where the Court observed that in the absence of a clear law, people often fall into legal grey areas. It’s relevant to crypto because India currently has taxation but no regulatory framework, which leaves both users and authorities confused.
Conclusion
Cryptocurrency in India is standing at a very tricky spot. On one hand, lakhs of people are investing in digital currencies like Bitcoin and Ethereum. On the other hand, there’s no proper law to tell people what’s allowed, what’s not, and how they can be protected if something goes wrong. The Supreme Court has tried to do its part. In 2020, it supported the right of people to trade in crypto by removing the RBI’s banking ban. Bit in 2025, when people again went to the Court asking for new rules after the WazirX hack, the judges made it clear that it’s not their job to make laws. They reminded everyone that only the government and Parliament can bring in a clear policy. At the same time, the judges did not ignore the risks. They openly said that crypto trading without rules could become as dangerous as a hawala system, illegal, untraceable, and harmful to the economy. This clearly shows that the legal system is aware of the growing problems in the crypto world, but its hands are tied without proper legislation. The government, while collecting taxes from crypto profits hasn’t given any clarity on how crypto should be regulated. This mismatch is confusing for investors, risky for users, and difficult for courts to deal with. The proof is already in front of us, i.e., major hacks, scams, and lack of consumer protection. What India needs now is not more warnings or temporary fixes, but a well-drafted, full-fledged law that explains how cryptocurrency should work, what protections people have, and how authorities can take action when things go wrong.
Until that happens, India’s crypto journey will continue in a grey zone, partly accepted, partly feared, and not fully understood. The Supreme Court has done its bit by calling out the problem. Now it’s time for the government to take responsibility and provide a clear legal path forward, so that innovation can grow, people can feel safe, and the country can truly benefit from this digital revolution.
FAQS
Is cryptocurrency legal in India?
A: Cryptocurrency is not illegal, but it’s also not fully legal. There is no clear law yet. You can buy, sell, and trade crypto, but you do it at your own risk because there is no specific rules to protect you.
What did the Supreme Court say about cryptocurrency?
A: In 2020, the Supreme Court said that banning crypto was unfair and stopped the RBI from blocking banking services for crypto users. But in 2025, the Court said it can’t make laws for crypto because that’s the job of the government.
Why is the Court comparing crypto trading to “hawala”?
A: This is because there are no rules, crypto trading can become like a secret money system, just like hawala, which is illegal. The Court is worried that without laws, crypto can be used for money laundering, scams, or funding illegal activities.
If there’s no law, why is the government taxing crypto?
A: The government charges 30% tax on crypto profits and 1% TDS on transaction, but still hasn’t made a law to properly regulate it. So people are paying taxes without having clear rights or protections.
What do investors and users need right now?
A: People need a clear law that explains how crypto can be used, what’s legal, what’s not, and how they can be protected from fraud or hacking. Right now, there’s too much confusion, and the risks are high for ordinary users.
