Government Faces Pressure from Indian Supreme Court to Formulate Cryptocurrency Regulations

Government's Lack of Action on Cryptocurrency Regulation Questioned by Indian Supreme Court, with Warnings that Muddled Laws Encourage Misuse and Uncertainty in the Field.

, and Administrator

2025 September 2 . 8:44 AM

2 min read

Government Faced with Pressure from Indian Supreme Court to Formulate Cryptocurrency Regulations

Government Faces Pressure from Indian Supreme Court to Formulate Cryptocurrency Regulations

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As India's cryptocurrency market continues to grow, the Indian government is moving towards a structured, multi-agency regulatory model, aiming to balance innovation and risk management while aligning with global norms.

According to a report by Bar and Bench, Justices Surya Kant and NK Singh have expressed concerns over the lack of a clear legal framework for cryptocurrencies, which has enabled widespread misuse and uncertainty in the sector. The bench stated that it is necessary to take steps to regulate cryptocurrencies due to their volatility and potential for rapid value changes.

Despite the legal recognition of cryptocurrencies, as evidenced by the 30% tax on profits from Bitcoin trading, a comprehensive regulatory framework has yet to be implemented. The Indian Supreme Court has questioned the central government for its continued inaction on regulating cryptocurrencies.

The bench has emphasized that any decisions regarding cryptocurrency regulation should be made in consultation with experts to ensure a well-informed and balanced approach. The existing regulatory grey area, with multiple agencies involved in oversight, including SEBI, RBI, and the Finance Ministry, has led to discussions regarding potential reforms to the tax rates to encourage sector growth while ensuring compliance.

From April 2025, SEBI began overseeing crypto tokens resembling securities, indicating a move towards a multi-agency regulatory framework. The Central Board of Direct Taxes (CBDT) has been consulting crypto platforms and stakeholders to draft more comprehensive Virtual Digital Asset (VDA) legislation, seeking feedback on the adequacy of existing regulations, regulatory authority assignments, and the impact of the current tax regime on trading volumes and enforcement challenges with offshore exchanges.

India is preparing for an October 2025 Financial Stability Board (FSB) peer review to align its regulations with international standards, reflecting India's active role in global financial governance discussions like the G20. A government discussion paper on cryptocurrency regulation was planned for mid-2025, aiming for public consultation among financial institutions, legal experts, crypto companies, and the general public prior to finalizing new rules.

The legal status of crypto gambling remains ambiguous, with no explicit prohibition or approval; however, there is parliamentary interest in regulating this area as part of broader crypto legislation. Justice Kant, addressing Additional Solicitor General Aishwarya Bhati, remarked that the judiciary continues to encounter practical difficulties in handling cases related to cryptocurrency, underscoring the growing need for legal clarity in the space.

The bench has expressed concern about the lack of a system to prove the authenticity of cryptocurrencies, stating that experts would need to examine them. The way India navigates the complex terrain of cryptocurrency regulation could shape its domestic market and potentially influence regulatory trends worldwide.

In summary, India's cautious yet deliberate path towards cryptocurrency regulation aims to establish a well-informed and balanced approach, balancing innovation and risk management while aligning with global norms. Full legal clarity and comprehensive crypto regulation are expected to materialize soon.

[1] Bar and Bench. (2025). India's Cryptocurrency Regulation: A Work in Progress. [2] The Economic Times. (2025). SEBI Takes Charge of Crypto Tokens Resembling Securities. [3] The Hindu. (2025). Crypto Gambling: A Grey Area in India. [4] The Times of India. (2025). India's Cryptocurrency Taxation: A Burden or a Deterrent?. [5] Livemint. (2025). India Prepares for FSB Peer Review on Cryptocurrency Regulations.