In May 2025, the Supreme Court of India advocated for regulating cryptocurrencies instead of imposing a ban, emphasizing the need for a legal framework to manage digital assets. This stance emerged during a bail hearing involving a cryptocurrency-related fraud case, where the court highlighted the complexity of crypto markets and the necessity for expert consultation to craft effective regulations.
The court noted that cryptocurrencies like Bitcoin are already subject to a 30% tax on profits and a 1% tax deducted at source, indicating partial legal recognition. This follows the court’s 2020 decision to overturn a Reserve Bank of India (RBI) circular that had prohibited banks from facilitating crypto transactions, citing the ban as disproportionate.
Despite concerns about volatility and potential misuse, such as money laundering, the court believes regulation aligns better with global trends and India’s growing crypto market, which had a value of $221.5 million in 2023 and nearly 200 million holders in 2024. However, no comprehensive regulatory framework has been finalized, and the RBI remains cautious, promoting its own digital currency, the e-Rupee, while warning against private cryptocurrencies.
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Regulating cryptocurrencies could legitimize and boost India’s crypto market, valued at $221.5 million in 2023 with nearly 200 million holders in 2024. A clear framework may attract institutional investors and foster blockchain innovation. A regulated crypto sector could create jobs in tech, finance, and compliance, supporting India’s growing digital economy.
Aligning with global trends (e.g., U.S. and EU regulatory frameworks) could position India as a hub for crypto innovation, reducing brain drain and capital flight to less restrictive jurisdictions. Regulation could introduce KYC/AML (Know Your Customer/Anti-Money Laundering) norms, reducing scams like the one prompting the Supreme Court’s remarks, where crypto was used for fraudulent activities.
Oversight might curb volatility in crypto markets, protecting retail investors while allowing informed participation. Formalizing the sector could enhance tax compliance, building on the existing 30% capital gains tax and 1% TDS on crypto transactions. 6Crafting rules for a decentralized, volatile asset class requires expertise, as the Supreme Court noted, potentially delaying implementation.
India’s regulatory bodies, like SEBI or RBI, may struggle with monitoring decentralized platforms and cross-border transactions. Overregulation could stifle startups, while underregulation risks financial crimes and investor losses. India’s approach could influence other developing nations, especially in South Asia, to adopt similar regulatory models, shaping global crypto standards.
A balanced framework might encourage international crypto firms to enter India, boosting foreign direct investment. Supreme court advocates regulation over bans to align with global trends and protect investors, as seen in its 2020 ruling against the RBI’s blanket ban and recent calls for a legal framework. Exchanges like CoinDCX and WazirX support regulation, arguing it would provide clarity, reduce fraud, and attract institutional capital. Industry leaders have called for progressive laws to foster innovation.
With nearly 200 million crypto holders, many see regulation as a way to legitimize investments, enhance security, and reduce risks of fraud or exchange failures. Reserve Bank of India (RBI) remains skeptical, citing risks of money laundering, terrorism financing, and financial instability due to crypto’s volatility. The RBI promotes its e-Rupee as a safer, centralized alternative and has historically favored restrictive measures, like the 2018 banking ban.
Banks and financial institutions worry about competition from decentralized finance (DeFi) and the challenges of integrating crypto into existing systems. Policymakers express concerns about crypto’s potential to destabilize India’s economy or enable illicit activities, advocating for stringent controls or outright bans. The Finance Ministry has taken a nuanced stance, imposing taxes on crypto (30% on profits, 1% TDS) but not yet finalizing a comprehensive law. It’s exploring regulation under G20 frameworks to balance innovation and risk.
Economists argue for a risk-based approach, regulating stablecoins and major cryptocurrencies differently from speculative tokens, to harness economic benefits while minimizing harm. The crypto industry pushes for freedom to innovate, while the RBI prioritizes financial stability, creating friction over how strict regulations should be.
The RBI’s e-Rupee represents centralized control, clashing with crypto’s decentralized ethos, raising questions about whether regulation will favor state-backed digital currencies. While the Supreme Court and industry align with global regulatory trends, the RBI’s cautious approach reflects local concerns about economic sovereignty and financial crime.
The Supreme Court’s push for regulation signals a progressive shift, potentially unlocking economic benefits and aligning India with global crypto markets. However, the divide between pro-regulation advocates and cautious entities like the RBI highlights the challenge of balancing innovation, investor protection, and financial stability. The outcome hinges on whether India can craft a framework that addresses these tensions while leveraging its massive crypto user base to drive economic growth.