'Banning may be shutting your eyes': Supreme Court flags need to regulate cryptocurrency

The Supreme Court has orally questioned why no regulatory framework has been brought in to govern cryptocurrency, suggesting that banning it outright may not be a wise option for the economy.

A Bench of Justice Surya Kant and Justice NK Singh noted that while no one is suggesting a complete halt to cryptocurrencies, regulatory oversight is necessary, and any policy decision should be made in consultation with experts.

“In (another) matter, almost two years back, I made an observation and called upon learned Attorney General (and asked him), are you doing something to regulate this cryptocurrency? He came and said, ‘We can’t. There is international market, this and that’ … There are new kinds of mechanisms evolving for international trade also. Banning may be shutting your eyes (to) ground reality. But what about regulating it? … We aren’t experts. Experts would examine it, but some steps to regulate it and have an eye on it (are necessary),” the Bench said, according to a Bar & Bench report.

The Bench also pointed out that the taxation of gains from cryptocurrency trading at 30 percent indicates some degree of legal acknowledgment. “If it is already acknowledged in this manner, why not regulate it?” the Court asked.

These observations were made during a hearing in a case involving a man accused of abducting two employees of the now-defunct cryptocurrency platform BitConnect in early 2018 and extorting 2,091 Bitcoins, 11,000 Litecoins, and Rs 14.5 crore in cash, allegedly to recover his investment losses.

While the judges said that the broader issue of cryptocurrency regulation could be taken up separately, they stressed that the immediate concern was to assess the role of the petitioner in the alleged incident. “That (cryptocurrency regulation), we can deal with separately. We have to deal first of all with this gentleman (petitioner), because right now it is difficult to understand from the file whether he is victim or victimiser,” the Bench said.

Justice Kant also remarked on the evidentiary challenges courts face in crypto-related cases: “Tomorrow, somebody will ask me, you please prove – what is the asset? How are we going to prove it?”

Additional Solicitor General Aishwarya Bhati said she would seek instructions from the Union government and provide an updated status report on both the ongoing investigation and the Centre’s position on cryptocurrency by July.

The matter is listed for further hearing on May 30, with the Court directing the Central Bureau of Investigation (CBI) to make efforts to complete the investigation by then.