On Monday, the Supreme Court of India drew parallels between Bitcoin trading and a modernized version of the Hawala system, which is notorious for facilitating illegal money transfers. This commentary comes as the court expressed dissatisfaction with the Indian government for its lack of clear regulations concerning virtual currencies. The remarks were made during a bail hearing for Shailesh Babulal Bhatt, who has been accused of engaging in unlawful Bitcoin trading.

Court’s Concerns Over Cryptocurrency Regulations

A bench comprised of Justices Surya Kant and N. Kotiswar Singh highlighted that two years ago, they had urged the government to clarify its stance on virtual currencies. Unfortunately, there has been no substantial update or regulatory framework introduced since that time.

• Key Points from the Hearing:
  • Justices pointed out the need for legislation on Bitcoin.
  • Bhatt’s lawyer, Mukul Rohatgi, argued that Bitcoin is not illegal in India.
  • The Supreme Court had previously annulled an RBI circular that restricted Bitcoin trading.

Rohatgi insisted that his client’s arrest was unwarranted, emphasizing that trading cryptocurrencies is permissible under Indian law. In response, Justice Surya Kant admitted his limited knowledge about Bitcoin but reiterated the necessity for clear guidelines to mitigate legal ambiguities.

Bitcoin’s Value and Market Perception

Justice Surya Kant remarked that he perceived a distinction between "genuine" and "fake" Bitcoins. He conveyed that, without regulatory oversight, trading in Bitcoin bears resemblance to a more sophisticated version of the Hawala system. Rohatgi countered this by highlighting the growing acceptance of Bitcoin globally, noting that in some countries, individuals can purchase a car for a single Bitcoin, which was valued at ₹82 lakh as of Sunday.

The Additional Solicitor General, Aishwarya Bhati, representing the Gujarat government and the Enforcement Directorate, indicated the need for a comprehensive response to the bail application, as the case extends beyond mere Bitcoin transactions.

Next Steps in the Legal Proceedings

The Supreme Court has granted the Gujarat government and the ED a ten-day window to submit their detailed responses, scheduling the next hearing for May 19. Bhatt has been in custody since his arrest on August 14 of last year and is contesting the Gujarat High Court’s ruling from February 25, which denied him bail.

In summary, the Supreme Court’s discussion reflects a pivotal moment for cryptocurrency regulation in India, emphasizing the urgent need for clear policies that could define the future of Bitcoin trading in the country. As the legal landscape evolves, the implications for traders and investors will be significant.