Supreme Court Seeks Union's Stand Regarding Cryptocurrency

The Bench of Justices Surya Kant and K.V. Vishwanathan passed this direction while granting interim protection from arrest to the present petitioner (Ganesh Shiv Kumar Sagar). The petitioner was booked under several provisions of the Indian Penal Code including Section 420 (Cheating), in connection with a cryptocurrency fraud. It may be noted that the FIR was registered in the State of Jharkhand.

Earlier on September 21, 2023, the Attorney general of India had apprised the Court that the matter required in depth consideration keeping in view of the domestic and international perspective. Thus, it was submitted that due deliberations will be made within two/three months. It was also stated that the Court shall be informed with the outcome at the earliest.

Now, in the instant order, the Court has granted four weeks' time to the Union to come up with its position pertaining to cryptocurrency.

“So far as the stance of Union of India with reference to the matters of crypto currency arising in different States is concerned, learned Additional Solicitor General of India seeks and is granted four weeks' time to file an appropriate affidavit.,” the Court ordered.

Brief Factual Background And Similar Cases

In July, 2023, the Court had granted bail to the same petitioner against the FIR booked in Bihar. Pertinently, FIR has been  registered against him in four different states. He has been accused of duping innocent investors to become part of a sham exchange whereby investors were lured into selling cryptocurrency.

It was alleged that the accused had portrayed himself as the distributor of 'Bux Coin', a crypto currency launched by a company named 'Bitsolives' of which he was a director. The petitioner was said to have subsequently set up a sham exchange termed 'Cash Finex' along with his co-accused and investors were lured into selling their crypto currency. Purportedly, the company closed the exchange after a while and disappeared.

It may be noted that recently the Top Court has witnessed a slew of cases arising out of Cryptocurrency Scam. Last year, in December, the Court transferred the cases relating to the 'GainBitcoin Ponzi Scheme' to the Central Bureau of Investigation. Further, it also transferred the trial of the cases to the CBI Court, Rouse Avenue, New Delhi.

Appearing for the petitioner, who sought interim protection, several senior advocates pleaded that bitcoin by far has not been expressly recognised as illegal. Since the technical complexities involved are novel, they argued that an expert agency should investigate the matter.

Highlighting that the legality of Bitcoin is a grey area, Dave expressed, “The Government of India cannot answer whether it (Bitcoin) is legal or illegal...see this prayer please appoint a centralised agency...Pune police was handling it... Bitcoin was not illegal. It depended on market fluctuations. They don't get it. Hundreds of people filed cases against me. ED has said that it is not a legal tender. If it is not legal, all of it is illegal so they're asking for proceeds of crime? This is why we came under Article 32 to ask - is it legal or illegal? Where is that act which was going to be passed in parliament…”

Additionally, it may be noted that in March, 2023, the Ministry of Finance had notified that cryptocurrency exchanges will be “persons carrying on designated businesses or professions” within the meaning of Section 2(1)(sa) of the Prevention of Money Laundering Act.

This meant that crypto exchanges would come under the ambit of 'reporting entity' within the meaning of Section 2(wa) of the PMLA. As a consequence, crypto exchanges were required to follow the norms and obligations of other reporting entities likes banks and financial institutions in relation to verification of identities of clients, maintenance of records etc.

Lastly, it may be recalled, that back in 2020, the Apex Court had rendered a significant judgment in a field of crypto currencies. Therein, the Court had lifted the curbs imposed by the Reserve Bank of India on regulated entities such as banks and NBFCs from dealing with virtual currencies and from providing services to crypto businesses. The Court had set aside the RBI's circular, which prevented regulated entities from providing banking services to those engaged in the trading or facilitating the trading in VCs, on the “ground of proportionality”.

Case Title: GANESH SHIV KUMAR SAGAR vs. UNION OF INDIA., Diary No.- 1116 – 2023

Click here to read/ download the order