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Indian Court Urges Government Action on Cryptocurrency Amid Regulatory Dilemma

3 mins
Updated by Geraint Price
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In Brief

  • The Indian Supreme Court has directed the government to reveal its plans for probing cryptocurrency crimes.
  • The court expressed concern over the absence of a law or expert agency to supervise the crypto sector.
  • Industry players expect more time till the country establishes a specialized regulatory framework for crypto.
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India’s Supreme Court has directed the Union government to reveal its plans for regulating crypto crimes in India. According to local reports, the court called it “unfortunate” that the administration has not established a federal agency or law to probe cryptocurrency cases.

Meanwhile, industry players expect it will be a few months until the country develops a specialized framework to tackle the sector.

Supreme Court Pulls up Indian Administration

Judges questioned the government’s ability to handle complex cryptocurrency cases with its current law enforcement setup. According to the Hindustan Times, the officials said: “You still don’t have any law, unfortunately. Do you have an agency at the national level to understand these cases and investigate properly?”

The judges emphasized the need for a specialized national agency to ensure quality investigations “in the national interest.” This also means the government needs to put comprehensive crypto regulations in place.

Read more about India’s plans for its digital rupee.

The statement came as the court addressed petitions filed by Ganesh Shivkumar Sagar, currently facing cryptocurrency fraud charges in multiple states. Sagar requested bail and suggested a central agency leads the investigation.

The bench asked, “But so long you don’t have a mechanism, how do you investigate people and keep them behind bars?”

There is currently no timeline for the introduction of crypto regulation. However, industry players believe that definitive actions toward partial regulation may take a few more months.

BeInCrypto spoke to Advocate-on-Record in the Supreme Court of India, Rajat Mittal, about the news. He noted, “Supreme Court’s request to central government to have a law and to establish an agency is a significant development in the ongoing debate regarding surrounding regulating cryptocurrencies.

“Having a dedicated agency and a clear law would address concerns related to money laundering, fraud, consumer protection and provide a safer environment for investors and users,” he added.

Crypto Legislation Not Close

In a recent conversation, Ashish Singhal, the chief of crypto exchange CoinSwitch, said a crypto regulatory framework in India may not come within the next six months.

“In my personal opinion, in the six-month period, to get a framework out is hard, but you will see definitive actions happening, like you saw in the last three months,” Singhal told Moneycontrol.

The Indian regime puts cryptocurrencies under a taxation regime but has not recognized them as a legal asset class. Meanwhile, the Indian central bank has repeatedly maintained a negative stance on the sector. The country also faces added pressure as it is chairing the G20 summit.

However, despite the regulatory uncertainty, India has emerged as the largest crypto employer in Asia. It has even overtaken China by the latter’s regulatory clampdown. India has a significant presence in major crypto companies worldwide, according to a recent study by K33 Research.

Crypto Industry in India Faces Challenges

While India remains an attractive destination for the crypto industry, it also faces challenges with ongoing police cases related to cryptocurrencies. Recently, the Central Bureau of Investigation (CBI) arrested a resident from the national capital.

The alleged criminal reportedly posed as a Canadian government official to deceive victims into transferring their assets to crypto wallets. According to local reports, the central agency recovered around $121,000 during a search operation.

According to Rajat Mittal, numerous cases involving crypto fraud are under investigation by agencies like the Directorate of GST Intelligence, Enforcement Directorate, and Financial Investigation Unit. He highlighted that these investigations often hit a standstill in the absence of clear crypto regulations.

“Government should contemplate bringing a regulation after engaging with experts and blockchain community,” the advocate said.

This year, the Indian government brought the crypto sector under the Prevention of Money Laundering Act (PMLA). Virtual Digital Assets businesses must adhere to various reporting requirements, including KYC norms.

However, the Supreme Court’s directive reflects the pressing need for a well-defined regulatory framework.

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Shraddha Sharma
Shraddha is an India-based journalist who worked in business and financial news before diving into the crypto space. As an investment enthusiast, she has also has a keen interest in understanding crypto from a personal finance standpoint.