"Bitcoin Trade Method equivalent to Hawala Business" : Indian Supreme Court on Cryptocurrency Transactions
New Delhi's Supreme Court Calls Bitcoin Trade Similar to a Refined Hawala Business
Here's a lowdown on the latest buzz from the Supreme Court regarding the trading of Bitcoin in India, a digital currency that’s been deemed as a refined version of the unregulated Hawala business.
On a recent Monday, the Supreme Court expressed its concerns about the lack of clear regulatory guidelines for Bitcoin trade, claiming that trading in Bitcoin in India is akin to dealing with a sophisticated Hawala operation. The court was addressing a bail application for Shailesh Babulal Bhatt, who was arrested by the police for suspected unlawful Bitcoin trade.
The court had previously asked the Central government to submit its policy stance on virtual currency trading two years ago. However, the government is yet to respond.
Mukul Rohatgi, representing Bhatt, argued that trading in Bitcoin is not deemed illegal in India after the top court invalidated the Reserve Bank of India's circular. Nevertheless, Justice Surya Kant expressed reservations, stating that even though he doesn't fully grasp the intricacies of Bitcoin, the court has consistently encouraged a clear regulatory regime to prevent issues.
"I only understand that there are some legitimate Bitcoins and some fraudulent ones," Justice Surya Kant remarked, adding that, in essence, trading in Bitcoin in India is like dealing with a highly sophisticated Hawala operation. Rohatgi agreed, stressing that Bitcoin holds immense value, and one could possibly purchase a car in a foreign country using a single Bitcoin.
The additional Solicitor General, Aishwarya Bhati, representing the Gujarat government and the Enforcement Directorate, expressed the intention to file a comprehensive counter to the bail application. The top court granted 10 days for the submission of the response and scheduled a hearing for May 19.
Bhatt has been in police custody since his arrest last year in August, claiming that the FIRs against him were unfair. He has challenged the Gujarat High Court's February 25 order that denied him bail.
In January 2021, the Central government informed the Supreme Court that it was still deliberating on establishing a regulatory mechanism for cryptocurrencies and their related offenses. On February 25, 2022, the top court asked the Central government to clarify its stance on whether trading in Bitcoin or any other cryptocurrencies is legal in India or not.
The Supreme Court's commentary indicates growing concerns about the potential misuse of cryptocurrencies, much like Hawala, which operates outside legal frameworks and has been associated with illicit activities such as money laundering. The absence of clear regulations continues to raise questions about the vulnerability of cryptocurrency trading for activities reminiscent of Hawala.
[1] Source: The Economic Times[3] Source: The Hindu[4] Source: Bloomberg Quint
- Mukul Rohatgi contended that trading in Bitcoin is not explicitly illegal in India, given the top court's previous ruling that invalidated the Reserve Bank of India's circular.
- Justice Surya Kant, however, expressed reservations, stating that, despite not fully understanding the complexities of Bitcoin, a clear regulatory regime is necessary to prevent potential issues.
- Rohatgi concurred with the Justice's comment, likening the Bitcoin trade in India to a highly sophisticated Hawala operation, implying its immense value and potential for purchase of significant assets like a car in a foreign country.
- The absence of clear regulations on Bitcoin trade continues to leave room for questions about its vulnerability to activities similar to Hawala, which often operate outside legal frameworks and are linked to illicit activities such as money laundering.
