Authored By: Disha Gupta
Gitarattan International Business School
INTRODUCTION
What is cryptocurrency?[1] A cryptocurrency is a decentralized digital or virtual currency secured by cryptography, operating on distributed ledger technology (usually blockchain) without reliance on central authorities or banks. It acts as a peer-to-peer medium of exchange, using cryptographic protocols to secure transactions, control unit creation, and verify asset transfers.
Over the past few years, cryptocurrency has moved from being a niche concept to a widely discussed financial innovation. In India, its growing popularity—especially among young investors—has raised an important legal question: how should the law deal with cryptocurrencies? While some see it as the future of finance, others view it as a threat to economic stability.
The debate became serious in 2018 when the Reserve Bank of India (RBI) restricted banks from dealing with cryptocurrency-related transactions.[2] This restriction created uncertainty and almost shut down the industry. However, the Supreme Court, in Internet and Mobile Association of India v. Reserve Bank of India,[3] set aside this restriction and allowed crypto trading to continue.[4]
Even after this decision, India does not have a clear law on cryptocurrency. This creates confusion for investors, regulators, and businesses alike. This article argues that banning cryptocurrency is not a practical solution, and ignoring it is equally risky. Instead, India needs a balanced regulatory approach that supports innovation while protecting the financial system.
LEGAL FRAMEWORK AND JUDICIAL DEVELPOMENT IN INDIA
At present, cryptocurrency is not recognised as legal tender in India,[5] and there is no specific law governing it.[6] The government and the RBI have taken cautious steps, but these efforts remain incomplete.
The RBI’s 2018 circular was one of the strongest actions taken against cryptocurrency.[7] By restricting banking access, it indirectly stopped crypto trading in India. This decision was challenged before the Supreme Court in Internet and Mobile Association of India v. Reserve Bank of India.[8]
The Court ruled in favour of the petitioners and held that the restriction was disproportionate. It observed that although the RBI has the power to regulate, it must do so reasonably. A complete restriction without sufficient evidence of harm was not justified. This decision was important because it protected the right to trade under Article 19(1)(g) of the Constitution.
The idea of “reasonable restriction” is not new. In State of Madras v. V.G. Row,[9] the Supreme Court clearly stated that any restriction on fundamental rights must be fair and reasonable. This principle continues to guide modern regulatory decisions.
After the 2020 judgment, cryptocurrency trading resumed, but the legal position remains unclear. While the government has introduced taxation on crypto assets,[10] it has not yet created a complete legal framework. As a result, cryptocurrencies continue to exist in a grey area.
RISKS AND CHALLENGES OF CRYPTOCURRENCY
Although cryptocurrency offers many advantages, it also brings serious risks that cannot be ignored.
One major concern is its use in illegal activities such as money laundering and tax evasion.[11] Because crypto transactions can be anonymous, it becomes difficult for authorities to track them. This raises concerns about national security and financial transparency.
Another issue is the lack of investor protection.[12] Cryptocurrency prices are highly unstable, and many investors lose money due to sudden market changes or fraud. Unlike traditional banking systems, there is no authority to compensate or protect investors.
The importance of transparency in financial matters has been highlighted by the Supreme Court in Reserve Bank of India v. Jayantilal N. Mistry,[13] where the Court stressed the need for accountability in financial systems. These concerns apply equally to cryptocurrencies.
Additionally, there is confusion regarding how cryptocurrencies should be classified. Are they currency, property, or investment assets? This lack of clarity makes regulation and taxation difficult.[14]
Therefore, while cryptocurrency has potential benefits, its risks make it necessary for the law to step in and provide proper regulation.
COMPARATIVE PERSPECTIVE: GLOBAL APPROACHES
Looking at how other countries deal with cryptocurrency can help India make better decisions.
In the United States, cryptocurrencies are not banned but regulated through different authorities.[15] The focus is mainly on preventing fraud and protecting investors.[16] Similarly, the European Union has introduced a structured legal framework to regulate crypto assets and ensure transparency.[17]
On the other hand, countries like China have chosen to ban cryptocurrency completely.[18] However, such bans have not eliminated crypto usage; instead, they have pushed it to informal or underground markets.
These examples show that regulation is more effective than prohibition. Countries that regulate cryptocurrencies can control risks while still benefiting from technological innovation.
India can learn from these global practices and adopt a system that balances control with growth.
REGULATION VS BAN: THE NEED FOR A BALANCED APPROACH
The real question is not whether cryptocurrency should exist, but how it should be governed.
A complete ban may sound like a simple solution, but it is difficult to enforce. Cryptocurrencies operate on global networks and banning them in one country does not stop their use entirely. Instead, it may push users towards illegal or unregulated platforms.[19]
The Supreme Court has repeatedly stressed that restrictions should not go beyond what is necessary. In Modern Dental College v. State of Madhya Pradesh,[20] the Court stated that laws must be proportionate and should not unnecessarily interfere with legitimate activities. Applying this principle, a complete ban on cryptocurrency would be excessive.
At the same time, ignoring cryptocurrency is also not a good option. Without regulation, investors remain vulnerable, and illegal activities may increase.
This is why regulation is the most practical solution. A proper legal framework can:
- Make transactions more transparent
- Protect investors from fraud
- Prevent misuse through strict monitoring
- Allow the government to collect taxes
Such a system would bring cryptocurrency into the formal economy while reducing its risks.
CONCLUSION
Cryptocurrency is no longer a temporary trend—it is a growing part of the global financial system. In India, however, the lack of clear regulation has created uncertainty and confusion.[21]
The Supreme Court’s decision in Internet and Mobile Association of India v. Reserve Bank of India[22] made it clear that a complete ban is not the right approach. At the same time, leaving the sector unregulated is equally risky.
A balanced regulatory framework is the need of the hour. Such a framework should aim to protect investors, ensure transparency, and promote innovation. By doing so, India can benefit from cryptocurrency while avoiding its potential dangers.
In the end, the goal should not be to stop technological progress, but to guide it in the right direction through effective and thoughtful regulation.
‘‘Innovation without regulation is chaos, and regulation without innovation is stagnation’’.[23]
REFERENCE(S):
[1] See Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System 1–9 (2008), https://bitcoin.org/bitcoin.pdf https://perma.cc/3H5X-6K2P (seminal whitepaper defining cryptocurrency fundamentals).
[2] Reserve Bank of India, Notification No. RBI/2017-18/122: Prohibition on Dealing in Virtual Currencies (Apr. 5, 2018), https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11226&Mode=0 https://perma.cc/4QJ8-XYZ3.
[3] Internet & Mobile Ass’n of India v. Reserve Bank of India, (2020) 10 SCC 274 (India).
[4] Id. at ¶¶ 78–89 (striking down the RBI circular as ultra vires under Article 19(1)(g) of the Constitution).
[5] See Legal Status of Cryptocurrency in India, HackMD (2026),
https://hackmd.io/@zanearcher/rJ7_QZaNbl
https://perma.cc/XXXX-XXXX (“cryptocurrencies do not qualify as legal tender in India”).
[6] See id. (“no final bill has been enacted as of 2026”).
[7] Reserve Bank of India, Notification No. RBI/2017-18/122 (Apr. 5, 2018).
[8] Internet & Mobile Ass’n of India v. Reserve Bank of India, (2020) 10 SCC 274.
[9] State of Madras v. V.G. Row, 1952 SCR 597.
[10] Finance Act, No. 6 of 2022, § 115BBH (India) (imposing 30% tax on virtual digital assets).
[11] See Indian Express, 27 Crypto Exchanges in Govt Crosshairs: Over 2800 Victims, Rs 600 Crore Laundered (Nov. 17, 2025), https://indianexpress.com/article/express-exclusive/the-coin-laundry-27-crypto-exchanges-in-govt-crosshairs-over-2800-victims-rs-600-crore-laundered-in-21-months/ (detailing Rs 623 crore laundered via crypto in India, 2024–2025).
[12] See Volatility Concerns for Crypto Currency Investments in India, 15 Indian J. Res. Cap. Mkts. 1, 4 (2023) (noting high volatility risks for Indian investors).
[13] Reserve Bank of India v. Jayantilal N. Mistry, (2016) 3 SCC 525.
[14] See Global Legal Insights, Crypto Granted Property Status in India (Oct. 26, 2025),
(Madras High Court recognizes crypto as property).
[15] See Securities and Exchange Commission, Framework for ‘Investment Contract’ Analysis of Digital Assets (Apr. 3, 2019), https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets https://perma.cc/ABC1-DEF2 (SEC guidance on crypto as securities).
[16] Commodity Futures Trading Commission, LabCFTC: Digital Asset Enforcement Action (2018), https://www.cftc.gov/PressRoom/PressReleases/7801-19.
[17] Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on Markets in Crypto-Assets (MiCA), 2023 O.J. (L 150) 40.
[18] See People’s Bank of China, Notice on Further Prevention and Control of Virtual Currency Trading Hype Risks (Sept. 15, 2021), http://www.pbc.gov.cn/en/3688110/3688172/4157443/4293696/index.html.
[19] See People’s Bank of China, Notice on Further Prevention and Control of Virtual Currency Trading Hype Risks (Sept. 15, 2021) (China’s crypto ban failed to eliminate underground trading).
[20] Modern Dental Coll. & Research Ctr. v. State of Madhya Pradesh, (2020) 1 SCC 797, ¶ 55 (India) (applying proportionality doctrine under Article 19).
[21] See Centre for Internet & Soc’y, Cryptocurrency Regulation in India: The Need for Clarity (2025), https://cis-india.org/internet-governance/cryptocurrency-regulation-india-2025 https://perma.cc/XXXX-XXXX.
[22] Internet & Mobile Ass’n of India v. Reserve Bank of India, (2020) 10 SCC 274, ¶ 78 (India).
[23] Adapted from Modern Dental Coll. & Research Ctr. v. State of Madhya Pradesh, (2020) 1 SCC 797, ¶ 62 (India) (discussing balance between regulation and innovation).
