Crypto concerns from Indian courts grow louder amid legal vacuum

Delhi High Court Justice Girish Kathpalia recently expressed concerns around the impacts of unmonitored crypto activities on the Indian economy. Kathpalia was hearing a case involving digital assets when he said cryptocurrencies are becoming tools for the dissolution of recognized finances into untraceable assets, Coingeek reported on Tuesday, August 5.

The case that the Justice was hearing involved a bail application from a businessman named Umesh Verma, accused in a crypto-related corruption case. Rejecting the bail, Kathpalia said that the multi-victim case was quite serious, highlighting that at least 13 more cases of similar nature are circulating in the courts.

The Coingeek report said Verma’s ongoing case revolves around his alleged involvement in defrauding 61 investors by pitching crypto investments with the promise of high returns. If convicted, Verma could face a substantially long prison sentence.

Kathpalia, responding to the case, noted that multiple complaints linked to cryptocurrencies are pending a hearing in the courts, owing to the lack of comprehensive regulations in the country.

The crypto space in India is partially regulated. While there are no specific dos and dont’s for the investors, crypto companies do have to register with the Financial Intelligence Unit and comply with anti-money laundering and anti-terror financing laws. Crypto incomes have also been subject to upto 30 percent tax in India since 2022.

While the Indian finance ministry is drawing up a discussion paper to clarify its stance around crypto, senior members of the legal fraternity have started calling for clear guidelines over digital assets in order to wrap up pending cases.

Earlier in May, for instance, a Supreme Court bench of Justice Surya Kant and Justice NK Singh had emphasized on the urgent need for crypto regulations in the country. At the time, the bench had reportedly told Additional Solicitor General (ASG) Aishwarya Bhati that the courts are facing practical challenges around crypto cases in the absence of regulatory guidelines.

Ajay Seth, the former Economic Secretary of India, had first said that the finance ministry was working on its crypto discussion paper back in July 2024. As of now, there has been no concrete update on this discussion paper.

In fresh updates, the finance ministry recently informed the parliament that it has no immediate plans to announce detailed crypto rules. Despite a prolonged outcry from the industry members, the finance ministry is also not considering a revision in the crypto tax laws for the time being.

Crypto assets remain largely unregulated in India and the government is not actively collecting data around these assets for now, Pankaj Chaudhary, the minister of state in the ministry of finance admitted to the parliament during its monsoon session. He reiterated India’s call for a global cooperation in developing crypto rules to regulate the sector uniformly across borders.