Bitcoin trade appears to be a refined form of hawala business: Supreme Court to Centre

The Supreme Court on Monday strongly questioned the Centre's continued inaction in framing a clear regulatory policy for cryptocurrency trade in India

The Supreme Court on Monday expressed displeasure over the Centre’s continued inaction in framing a clear regulatory policy for cryptocurrency trade in India, particularly for Bitcoin, raising concerns over its resemblance to the illegal hawala network and its potential economic impact.

A bench comprising Justices Surya Kant and N Kotiswar Singh, while hearing a bail plea in a high-profile Bitcoin fraud case from Gujarat, asked, “Why does the Centre not come out with a clear-cut policy on regulating cryptocurrency? There is a parallel under-market for it and it can affect the economy. By regulating the cryptocurrency, you can keep an eye on the trade.”

Justice Kant further remarked, “This Bitcoin trade is an illicit business, more or less like hawala. How can the apex court decide on the economic policy of the country? It is the domain of the government.”

The court was hearing the bail application of Shailesh Babulal Bhatt, who is accused of orchestrating a widespread cryptocurrency scam in Gujarat involving promises of high returns and even alleged instances of kidnapping.

Representing the Centre, Additional Solicitor General Aishwarya Bhati told the court that Bhatt was “one of the biggest aggregators of Bitcoin trade in the state” and had duped multiple investors.

Bhatt’s counsel, however, argued that trading in Bitcoin is not illegal in India, citing the apex court’s 2020 decision that struck down the Reserve Bank of India’s circular banning banks from dealing with cryptocurrency-related entities.

Despite that ruling, the apex court had already, in an earlier hearing on May 5, expressed displeasure over the Centre’s inaction, making observations such as “Bitcoin transactions appear to be a refined form of hawala business.”

On Monday, the bench again called for a firm policy response, noting that the Centre’s continued indecision is leaving room for illegal exploitation of the system. ASG Bhati assured the bench she would seek instructions from the government on the matter.

This is not the first time the court has prodded the government for a stand. Earlier this year, in February, the Supreme Court had also directed the Centre to clarify the legal status of cryptocurrency transactions.

The present case spans multiple FIRs lodged across different states, with Bhatt accused of defrauding several investors through fake Bitcoin schemes promising 18% returns per annum.

The apex court’s comments come amid global efforts to regulate the rapidly growing cryptocurrency sector. While several nations are moving forward with defined legal frameworks for cryptocurrencies, India has been treading cautiously, with no clear legislation in place despite cases of fraud, money laundering, and investor scams linked to digital currencies.

As the legal and regulatory vacuum persists, the Supreme Court’s latest remarks are likely to amplify pressure on the Centre to bring clarity and oversight to the cryptocurrency landscape in India.