India’s Supreme Court has sharply criticized the government’s handling of cryptocurrency, questioning why digital assets like Bitcoin are heavily taxed without any formal regulatory framework. During a recent hearing, Justice Surya Kant voiced concerns about the rise of a “parallel economy” driven by crypto, warning that the lack of oversight poses a threat to the country’s financial stability.

Despite a 30% tax on crypto gains and strict reporting requirements, India has yet to implement comprehensive rules governing the digital asset market. Kant pointed out the contradiction, stating, “If you can tax it, also please regulate it as you have recognized it by taxing it.”

The government's legal representative, the Additional Solicitor General, responded by saying they would “take instructions,” suggesting that a review of crypto policy may be on the table.

The debate arose during a May 5 court hearing on a Bitcoin-related case. Senior lawyer Mahesh Jethmalani argued that Bitcoin is already in widespread use globally, claiming it could even buy a car in Europe. However, such transactions remain rare and mostly limited to niche sellers. Jethmalani also mistakenly described Bitcoin’s creator, Satoshi Nakamoto, as a Japanese person using a fake name, overlooking Nakamoto’s true pseudonymous identity.

Justice Kant also raised concerns about the potential misuse of crypto in illegal activities, highlighting that while some cryptocurrencies may appear legitimate, others could be linked to criminal operations. He emphasized the urgent need for a system of rules to curb abuse.

India’s crypto ecosystem remains in limbo as investors, businesses, and regulators await clear legislation. The Supreme Court’s remarks may finally push the government to close the gap between taxation and regulation.