Supreme Court of India Flags Bitcoin Trading as Hawala in Absence of Clear Rules

Highlights:

• India has compared Bitcoin trading to an unclear trading system due to the lack of clear rules.
• India imposes taxes on virtual assets but still has no clear structure for trading or transactions.
• The government has delayed the crypto policy paper after changes in global markets affected India’s position on the issue.

India’s Supreme Court raised serious concerns during a bail hearing related to virtual asset trading. The bench said that Bitcoin trading looked like an improved version of hawala, often described as a means of moving money around in an unofficial method. The method is often used outside legal banking systems. Justices Kant and Singh made the comments during a court session.

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🚨 🚨 India’s Top Court Flags Bitcoin $BTC as 'Hawala-Like', Demands Clear Crypto Rules 🚨 🚨

Citing regulatory flaws, the Indian Supreme Court unexpectedly compared Bitcoin trade to a contemporary version of hawala.

India's cryptocurrency regulations are still ambiguous and…

— UnoCrypto (@unocrypto_com) May 6, 2025

The justices were determining the bail plea of Bhatt, who was arrested for his alleged role in illegal Bitcoin transactions. Justice Kant stated that he did not have detailed knowledge of Bitcoin trading. However, he added that without a clear system, such trading strongly resembled hawala.

The court had earlier raised a similar question during another case. That case involved an individual who was being accused of defrauding investors through a Bitcoin scam. At that time, the court had called upon the government to pronounce its stand on virtual assets. The bench has expressed concern that the government has not taken any action since then. They said the delay has left courts without the support they need to handle such matters.

India Lacks Legal Framework on Bitcoin Trading

Though India introduced some steps to track virtual asset activity, a clear legal structure still does not exist. In 2022, it adopted a tax of 30% on all profits realized from assets. It also began to impose a 1% tax at source on specific transactions that were above a certain threshold. These changes sought to establish supervision of financial operations in relation to the trading of virtual assets.

India extended its ban and included virtual asset transactions under the Prevention of Money Laundering Act in 2023. This brought them nearer to the conventional tracking of financial crime. As a result, the trading platforms, such as Binance, needed to get themselves registered with the Financial Intelligence Unit of India.

Despite the above measures, the lack of clear and comprehensive legal work remains as one of the major challenges. It has also been noted that this has led to courts being unable to compare various related cases. During the hearing, Rohatgi told the court that a single Bitcoin equals about ₹82 lakh. He said that in some countries, people can buy vehicles using these digital tokens.

Justice Kant said that the delay in forming rules had caused difficulty for legal bodies. He stressed that courts need structured guidance to address cases involving virtual assets.

Government Delays Policy Paper Following Global Market Changes

The government said in December that it had no fixed timeline for announcing a virtual asset policy. Ajay Seth, Secretary of the Department of Economic Affairs, explained the delay during a policy event. He said the government had completed a discussion paper by September last year. However, global developments forced them to review and update the content.

Seth pointed out that recent changes in the United States had influenced India’s position. He said India would need to adjust its approach based on these external shifts.

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