India's Supreme Court Compares Bitcoin Trading to Hawala Money Transfer System

According to India's highest court, Trading Bitcoin is similar to using the illicit Hawala money transfer system. Shailesh Babulal Bhatt is being accused of engaging in illegal

The highest legal body in India, the Supreme Court, has touched upon a pressing issue - the absence of cryptocurrency regulation in the country, despite it being the subject of previous discussions.

The observations were made during a bail hearing for Shailesh Babulal Bhatt, who is being accused by the Gujarat government and the Enforcement Directorate (ED) of engaging in illegal trading of Bitcoin. The bench, led by Justice Surya Kant, expressed concern over the lack of a clear legal framework for cryptocurrencies in India.

The apex court had earlier, more than two years ago, asked the central government to clarify its stand on cryptocurrency regulation. However, no significant response has been given to date, and the judiciary and public remain in the dark.

The central government was also criticized by the Supreme Court for inaction. The bench added that a proper regulatory regime could provide a way to combat the risks of Bitcoin trading.

"This is a polished form of Hawala business and there is an urgent need for clarity in this regard," Justice Kant stated.

The observations highlight a crucial void in India's approach to digital currencies. While the government has introduced taxation and anti-money laundering (AML) measures for crypto, a comprehensive regulatory structure is yet to be implemented.

The Supreme Court's comparison to the illicit Hawala money transfer system underscores the potential for crypto to be misused for illegal financial activities.

The bench, also comprising Justice M. Shankar, further pointed out that the trade of Bitcoins is not against the law in India and that Bitcoins are not considered to be tangible versions of cash.

Referring to a previous Supreme Court decision that overturned an RBI circular forbidding cryptocurrency transactions, Rohatgi, who appeared for Bhatt, said, "There is no law in India that says trading in bitcoins is illegal."

However, the bench was adamant that a defined legal structure be set up to prevent misuse.

The Gujarat government and the ED have been given 10 days by the court to respond to the matter. Further discussions on Bhatt’s bail and the matter of cryptocurrency regulation are expected to take place at the next hearing on May 19, 2025.