The Supreme Court (on January 19) asked the Union to present its stand with reference to cryptocurrency issues arising in different states.
The bench of judges 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 charged under various 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 informed the Court that the matter required in-depth consideration keeping in mind the national and international perspective. Thus, it was proposed that the due deliberations would be carried out within a period of two or three months. It was also stated that the Court will be informed of the result as soon as possible.
Now, in this order, the Court has granted four weeks of time to the Union to present its position regarding cryptocurrencies.
โWith regard to the stand of the Union of India with reference to cryptocurrency matters arising in different States, the Additional Solicitor General of India seeks and is granted a period of four weeks to file a suitable affidavit.", ordered the Court.
Brief factual background and similar cases
In July 2023, the court had granted bail to the same petitioner against the FIR registered in Bihar. Pertinently, FIRs have been registered against him in four different states. He has been accused of tricking innocent investors into being part of a fake exchange in which investors were encouraged to sell cryptocurrencies.
It was alleged that the accused had presented himself as a distributor of 'Bux Coin', a cryptocurrency launched by a company called 'Bitsolives' of which he was a director. The petitioner was said to have subsequently created a fake exchange named 'Cash Finex' along with his co-accused and investors were lured into selling his cryptocurrency. The company supposedly closed the exchange after a while and disappeared.
It is worth noting that the High Court has recently witnessed a number of cases arising from cryptocurrency scams. Last year, in December, the Court transferred cases related to the 'GainBitcoin Ponzi Scheme' to the Central Investigation Bureau. Further, he also transferred trial of the cases to CBI Court, Rouse Avenue, New Delhi.
Representing the petitioner, who sought interim protection, several high-profile advocates argued that bitcoin, so far, has not been expressly recognized as illegal. Since the technical complexities involved are new, they argued that an expert agency should investigate the matter.
Dave highlighted that the legality of Bitcoin is a gray area and expressed: โGovernment of India cannot answer whether it (Bitcoin) is legal or illegal... see this sentence, please appoint a centralized agency... Pune police was handling this... Bitcoin was not illegal. It depended on market fluctuations. They don't understand it. Hundreds of people filed complaints against me. ED has said that it is not a legal tender. If it's not legal, everything is illegal so they are asking for proceeds of crime? That is why we turn to article 32 to ask: is it legal or illegal? Where is that law that was going to be approved in parliament?โฆโ
Furthermore, it should be noted that in March 2023, the Ministry of Finance had notified that cryptocurrency exchanges will be "persons carrying on a designated business or profession" within the meaning of Section 2(1)(sa) of the Prevention of Money Laundering Act.
This meant that crypto exchanges would fall within the ambit of โreporting entityโ within the meaning of Section 2(wa) of the PMLA. As a result, crypto exchanges were required to follow the rules and obligations of other reporting entities, such as banks and financial institutions, regarding verification of customer identities, record keeping, etc.
Finally, it is worth remembering that back in 2020, the Supreme Court had made a significant judgment in the field of cryptocurrencies. In it, the Court had lifted restrictions imposed by the Reserve Bank of India on regulated entities such as banks and NBFCs for dealing with virtual currencies and providing services to crypto companies. The Court had set aside the RBI circular, which prevented regulated entities from providing banking services to those engaged in trading or facilitating trading in venture capital, on "reasons of proportionality".
Case Title: GANESH SHIV KUMAR SAGAR Vs. UNION OF INDIA., Journal No.- 1116 โ 2023
