Taboo is a word that is usually reserved for concepts that are not acceptable in the present times. For example, 100 years ago, same-sex marriages or equal voting rights for women were considered taboo subjects in societies.
Similar is the story of cryptocurrencies in India. A concept considered taboo when it comes to regulatory frameworks and open adoption, yet convenient enough to be taxed at 30% for any capital gains. Cryptocurrencies, including Bitcoin, are neither banned nor regulated in India, thereby creating a grey area where users continue to be exploited.
The disdain shown for the crypto sector by the Indian government has not gone unnoticed. Recently, a two-judge bench of the Supreme Court of India refused to grant bail to a man accused of operating Bitcoin illegally and observed that Bitcoin trading in India has become a “refined way of Hawala business.”
While making the sweeping statement, the SC also observed that it is the lack of regulatory clarity on cryptocurrencies by the Indian government that has turned Bitcoin trading “problematic.” The court also chided the Indian government for its failure to introduce regulations in crypto, despite the SC reminding them two years ago.
Similarly, when a group of WazirX exchange users approached the SC in April with a criminal writ petition, seeking an investigation into the Rs 2000 crore hack of the crypto exchange, the court dismissed the petition, stating it was not the “relevant authority” to hear the case.
At a time when even tiny kingdom nations like Bhutan are aggressively adopting cryptocurrencies and investing in Bitcoin mining, the current procrastinating attitude by the Indian government towards the sector is actually harming the prospects of Indian crypto users—who account for the maximum in any country globally.
The Urgent Need for a Regulatory Framework For Crypto In India
This is not the first time an Indian user has faced consequences due to unclear regulations. Recently, an Indian crypto trader faced 78% tax penalties for P2P transactions for a gain of only ₹1500. Many Indian users faced these problems on a daily basis.
The absence of clear cryptocurrency regulations in India has established a major vacuum that affects Indian investors, alongside businesses and the overall financial system structure. On one hand, the Indian government implemented a heavy 30% tax on crypto gains together with a 1% TDS on transactions in 2022, but it has not specified if cryptocurrencies fall under asset, commodity, or security classification.
The absence of clear guidelines about cryptocurrencies has compelled Indian crypto exchanges to work in an undefined regulatory space, which exposes them to unexpected policy changes and legal interventions. The self-regulatory measures implemented by CoinDCX, WazirX, and CoinSwitch cannot replace the need for full government regulations in the industry.
WazirX Case: A litmus Paper To Test Government Behaviour About Crypto
The same thing happened with the WazirX users. After nine months post-hack on July 18, 2024, worth Rs 2000 crore, as many as 54 users of WazirX had filed a criminal writ petition against Nischal Shetty and the exchange management. However, the Indian court dismissed the writ petition, citing that there is no proper crypto regulation in India.
2000 crore was not a joke. It was Indian crypto consumers’ hard-earned money, but the thing is, who will listen when there is no proper regulatory body or framework for digital currencies in India?
Final Thoughts
The Indian approach to treating cryptocurrencies as “taboo” shows a lack of understanding about modern financial developments worldwide. The complete prohibition or criminalization of a technological group remains unproductive despite reasonable precautions.
India is currently at a crossroads between maintaining its negative stance toward cryptocurrencies, which would lead to missed economic potential, or creating protective regulations that support innovation.
The statement made by the Supreme Court shows the precarious state of the crypto industry in India, where even regular traders are viewed suspiciously by law enforcement agencies and later turned away even by the judiciary, whose hands are tied due to a lack of regulatory framework. This vacuum allows not only scammers to steal crypto funds with impunity but also gives unhealthy powers to the police and law enforcement agencies to clamp down upon unsuspecting traders.
