India is sitting on a massive ₹174 trillion market cap, and it’s facing a big question: can its rules keep up with the booming crypto scene? This article takes a look at the important updates for investors, innovators, and policymakers.
In a recent ruling, the Supreme Court of India compared Bitcoin trading to a “refined hawala business,” highlighting the contradiction between a booming asset class and a regulatory vacuum. And two years after asking the government to explain its stance on cryptocurrency, judges say there is still no policy. But cases like Shailesh Bhatt’s arrest over alleged illegal trading demonstrate the human cost of ambiguity. How did India, home to over 100 million crypto users, arrive at this crossroads?
A Judicial Vacuum Without Resolution
According to the current market, 1 bitcoin price in India is ₹8.77 million, up 5.85% from 24 hours ago. And its market capitalization of ₹174,198.05 billion is larger than the GDP of most Indian states. And the Supreme Court has long condemned the Centre for inaction. In 2022, the courts decided that crypto payments were legal. But two years later, there is still no framework – and that leaves courts, investors and law enforcement in limbo. But what Justice Surya Kant acknowledged was, “I personally do not understand much about Bitcoin.” That’s representative of a broader institutional ignorance gap. Without technical literacy, how do policymakers craft effective rules?
The lack of regulation creates a paradox. While the court struck down the RBI’s 2018 ban on crypto firms, it did not legalize Bitcoin. It means that traders are subject to arbitrarily enforced rules. What Shailesh Bhatt has endured in detention since August 2023 is systemic indecision. And the Gujarat government’s plan to file a detailed counter shows authorities are retrofitting old laws for a new challenge.
Hawala Parallels and Possible Flawed Analogy
A fundamental misunderstanding is revealed when you compare Bitcoin to Hawala, an informal form of remittance. Hawala works in secrecy – it relies on trust between brokers and avoids formal records. In contrast, Bitcoin operates on a public blockchain ledger. All transactions are tracked – pseudonymously. If Hawala were a closed-door negotiation, Bitcoin would be a billboard in code.
Still, the court’s analogy is politically useful. Tax evasion and terror financing are synonymous with hawala in India. With Bitcoin, judges play on fears. Mixing everything together like this might actually hold back innovation. A crypto scene that’s regulated with KYC checks and keeping an eye on transactions does a better job of preventing shady happenings than just raising suspicions about it.
Legal Gray Areas and Enforcement Issues
Shailesh Bhatt’s case is an example of the chaos. And his counsel, Mukul Rohatgi, argues that Bitcoin trading became legal post-2020 after the Supreme Court struck down RBI restrictions on the currency. But that left Bitcoin undefined under other laws, like the Prevention of Money Laundering Act (PMLA). Gujarat’s enforcement agencies allege that Bhatt violated PMLA guidelines, but without specific statutes, such charges are subjective.
And now the Enforcement Directorate is adding another layer to Bitcoin’s cross-border potential. Rohatgi claims that one Bitcoin can be used to buy or finance a car abroad. However, in a nation with tight capital controls, this liquidity threatens financial sovereignty. So can India balance individual financial freedom with macroeconomic safeguards?
Market Dynamics and Speculation
India has a niche crypto market. It competes with traditional equity markets, which have ₹5,338.90 billion of daily trading volume. Retailers invest in Bitcoin to hedge against inflation and rupee depreciation. However, regulatory uncertainty increases volatility. One tweet by a government official could push up prices by 10%.
It’s this speculative frenzy that masks slower, steady institutional adoption. Indian tech firms are using blockchain for supply chains and land registries. Startups like Polygon have gone global. But the lack of rules prevents larger enterprises and banks from joining. How much economic potential remains untapped because of regulatory paralysis?
The Path Ahead: Clarity or Contradiction?
Certainly, the Centre has some options when it comes to cryptocurrencies. They can ban them or regulate them or leave things as they are. But you should realize that it may be hard to actually enforce a ban. People could just use VPNs and decentralized exchanges to get around it all. However, some rules might also generate revenue through taxes and oversight. Doing nothing right now only aids scammers and trolls trying to profit from the confusion.
Global precedents may give clues. The EU MiCA framework standardizes rules for exchanges licensed by Japan. Even China’s ban on the digital yuan has no effect on the global acceptance of digital currencies. India’s G20 presidency is pushing for some global crypto coordination, but progress at home is slow. Will they actually come up with a new law in the 2024 parliamentary session?
This whole Bitcoin situation in India shows a bigger issue of how 20th-century systems are struggling to keep up with 21st-century tech. The Supreme Court’s comparison to Hawala, while not perfect, does bring up some valid points about regulation. Still, India might risk losing touch with a tech-savvy crowd and fall behind in the blockchain race. And so, the ₹174 trillion question remains: Can the world’s fifth-largest economy afford to keep its most dynamic market in the dark?
