SC says no to making rules on cryptocurrencies: 'Can't lay down the law'

The petitioners wanted the court to tell the central government to create rules for cryptocurrencies since there is no law to control them right now

The Supreme Court on Wednesday refused to entertain a petition seeking the formulation of rules to regulate cryptocurrencies, stating it could not “lay down the law” in such matters.

 

Cryptocurrencies are digital currencies secured by cryptography, making them difficult to counterfeit or misuse. They function using Blockchain technology—a decentralised ledger maintained by a global network of computers.

 

The matter was heard by a Bench comprising Justices B R Gavai and Augustine George Masih. The counsel for the petitioners told the court that numerous complaints had been filed across India concerning cryptocurrency-related issues.

 

The petitioners had urged the court to direct the central government to frame regulations, given the absence of a specific law governing cryptocurrencies.

 

To this, Justice Gavai said, “It is in the domain of policymakers. How can we issue any such direction? We cannot lay down the law.”

 

The court advised the petitioners to take their concerns to the government instead. “The prayers made in the petition are within the domain of the legislature and the executive. In that view of the matter, we are not inclined to entertain the petition,” the Bench said.

 

It added that the petitioners were free to present their case before the appropriate authority.

 

In January last year, the central government had told the court it had not yet taken a decision on how to regulate cryptocurrencies or deal with offences involving them.

 

The petition came up during the hearing of a separate bail plea involving a person accused of crypto-related fraud in multiple states.

 

Not banned, but not legal tender

 

India does not have a dedicated law to regulate cryptocurrencies, though the government has introduced measures to monitor their use.

 

Cryptocurrencies such as Bitcoin and Ethereum are not banned, but they are also not recognised as legal tender.

 

Profits from the sale of cryptocurrencies are taxed at 30 per cent, and a 1 per cent tax is deducted at source on each transaction. While this ensures transparency in crypto-related activities, losses from crypto trades cannot be set off against other income.

 

Since 2023, cryptocurrency exchanges and platforms have also been required to comply with anti-money laundering norms. They must verify user identities and report suspicious transactions to the Financial Intelligence Unit.

 

The Reserve Bank of India continues to caution users about the risks of investing in cryptocurrencies and is promoting its central bank digital currency, the Digital Rupee. A draft Bill to regulate cryptocurrencies was prepared in 2021 but has not been passed yet.

 

(with inputs from PTI)