'Grey Area Exists In Cryptocurrency Regulation; Existing Laws Obsolete' : Supreme Court In Bitcoin Extortion Case

"There exists a grey area in the field of bitcoin/cryptocurrency regulation and the existing laws are completely obsolete. They cannot address this issue," said the Supreme Court today while dealing with a case involving allegations of bitcoin extortion.A bench of Justices Surya Kant, Dipankar Datta and Vijay Bishnoi was dealing with the plea of Gujarat-based Shailesh Babulal Bhatt, who is accused of cryptocurrency fraud across multiple states.During the hearing, Senior Advocate Siddharth Dave, appearing with Senior Advocate Mukul Rohatgi, for petitioner-accused, highlighted that the Court had earlier asked the Attorney General for India about the regulatory framework for cryptocurrencies.Recalling the exchange, Justice Kant commented, "When we were asking them that have some regulatory mechanism, a very, very sweeping statement was made - 'no, no, we are watching, we are looking at the international economic conditions'...".In response, Rohatgi pointed out, "today's newspaper says that the President of the United States has a company of bitcoins".Turning to Additional Solicitor General Aishwarya Bhati (for Union), Justice Kant said, "Different jurisdictions are saying different things about it. Some grey area is there and the existing laws are completely obsolete...".When ASG Bhati flagged that the issue in the present case is not that the petitioner was dealing in Bitcoins, but what he was doing with the Bitcoins, the judge said, "our problem is not that...this case we will resolve either way...our problem is (regarding regulatory framework)...do something about that".It may be mentioned that during earlier hearings of the case as well, the Court underlined the importance of regulating cryptocurrencies, while commenting that it would be unwise to impose a blanket ban. It infact equated unregulated bitcoin trading to hawala transactions and expressed that lack of clear regulatory mechanism has enhanced possibility of misuse.On facts of the case, Rohatgi was today heard contending that the petitioner appeared before the agencies 15 times prior to his arrest and that he is in custody since August, 2024. The senior counsel further urged the Court to grant the petitioner interim bail.He submitted that the petitioner got two FIRs lodged for extortion of bitcoins and kidnapping and the trial is proceeding in those cases against local police officers. After these FIRs, the senior counsel alleged, two FIRs against the petitioner were registered, but he was not chargesheeted. "I am not chargesheeted in any either (predicate offense), it's very strange! This is a gross case, what's going on?" Rohatgi argued.On a specific Court query, he clarified that chargesheet has been filed in one of the two cases, but not in the other. In the first case where chargesheet is filed, co-accused persons have been chargesheet but not the petitioner. He also informed that though the petitioner was named as an accused by ED in the ECIR, he was not named in the first prosecution complaint.ASG Bhati, on the other hand, beseeched the Court to let the petitioner remain in custody for some more time as the investigation is at a crucial stage. She asserted that the petitioner is being non-cooperative. "He initially said he was one of the investors, but he has not shown us any document that he had invested...his is a case purely of extortion!", the ASG exclaimed.She further highlighted that KYC compliance is now necessary for Bitcoin wallets and KYC-compliant wallets can be frozen at the request of investigating agencies. But the agencies are facing difficulties as regards KYC non-complaint wallets.After hearing the parties, Justice Kant said, "We will not comment that there is nothing against you (petitioner) or something...we will take up the matter in July. (To respondent-authorities) You complete meanwhile, whatever investigation...".Notably, the Supreme Court has time and again been dealing with pleas for cryptocurrency regulation.In November, 2023, a bench of former CJI DY Chandrachud and Justices JB Pardiwala, Manoj Misra dismissed a PIL seeking guidelines for trading and mining of cryptocurrency, noting that same appeared to be aimed at securing bail in a related case. "Parliament will do it, we will not issue any directions", said the bench.In September 2023, while dealing with the case of a person accused in a cryptocurrency fraud across states, AG Venkataramani apprised the Court that the matter required in depth consideration keeping in view of the domestic and international perspectives. He submitted that due deliberations would be made within 2-3 months and the Court informed of the outcome at the earliest. In January, 2024, while passing an order for interim protection from arrest, a bench led by Justice Kant asked the Union to file its stance with reference to matters of cryptocurrency arising in different states. Time was given to do the needful on two more subsequent dated and eventually, the case came to be disposed of by...

'Grey Area Exists In Cryptocurrency Regulation; Existing Laws Obsolete' : Supreme Court In Bitcoin Extortion Case

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'Grey Area Exists In Cryptocurrency Regulation; Existing Laws Obsolete' : Supreme Court In Bitcoin Extortion Case

Debby Jain

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