ABSTRACT
The surged in the development of cryptocurrency has transformed the global financial platform, offering exceptional opportunities for emerging technologies and digitally-mediated transactions. However, the same features that make cryptocurrency such as decentralization, obfuscated identity and cross-jurisdictional transfer, also identify it as an effective mechanism for committing economic crimes. In India, where even if the application and trading of cryptocurrencies have surged and expanded drastically, a clear regulatory framework to administer the digital assets are still significantly lacking. Vulnerabilities in the financial sector has led to economic crimes such as fraud, money laundering, Ponzi schemes and various cross border transfers due to the very gap in the legal governance of digital assets.
This research paper identifies the regulatory gaps in the Indian laws regarding crypto regulations and weak regulatory frameworks in the integration of cryptocurrency and related offences even under the pre-existing laws like the Prevention of Money Laundering Act (PMLA). The paper evaluates Indian legal approach to treat crypto offences, following the evolved jurisprudence post the Supreme Court’s judgement on the Internet and Mobile Association v. RBI[1] case and other landmark cases such as the GainBitcoin scam[2] and Enforcement Directorate seizures[3] under the Prevention of Money Laundering Act (PMLA). It further includes comparative study of the legislations including the international frameworks of the European Union’s MiCA[4] regulations, the regulatory model of the U.S.[5], and the licensing system for crypto entities of Singapore[6].
India’s cryptocurrency regulation has gone through evolution over the past few years characterised by a series of critical developments.[7]
INTRODUCTION
Socio-economic crimes or termed as white-collar crimes, often confine with non-violence and they are rather financially motivated crimes that are committed by entities in the position of authority and trust. These include offences like fraud, tax evasion, money laundering, and embezzlement, pose significant ultimatum to economic momentum and public trust. These are the offences which violate the laws and regulations that govern the social and economic well-being and activity of the society. And one such surging issue in India is the rise of such offence in the digital financial sector with the evolution of the new technologies.
Cryptocurrency is a digital currency which used the technique of cryptography to make secured transactions. Cryptography is the technique of the conversion of the information using algorithms and mathematical concepts into unreadable format called as cipher-texts. Cryptocurrencies arte decentralized which thus implies that they are not regulated by any central authority such as the government or the bank. They are thus different from the traditional form currencies which are controlled by the banks and government. It has three certain features; anonymity, decentralized and borderless transfer which have significantly contributed in its surge in popularity in the recent decade. However, the given features also made cryptocurrencies, significant tools for unlawful activities.Time and again, the same has been proven on the global jumbo-tron when cryptocurrencies have been used in financial terrorism, money laundering and to execute large-scale cross-border frauds. Despite uncertain regulatory frameworks the adoption of cryptocurrency has surged within India as well. “India has also got a fairly wide spread level of adoption across different assets of crypto despite restrictions, implying new participants to crypto would have been participating via services that were not banned. Now we’ve started to see some of those restrictions get rolled back, for example with Binance, which is probably just going to amplify adoption in the country.[8]“ said Eric Jardine, research head at Chainalysis.
The legal landscape of India’s regulatory framework has however been at the standpoint of ambiguity. The Reserve Bank of India (RBI) imposed a banking ban on crypto transactions in 2018, which was later repealed in 2020 by the Supreme Court. The Finance Ministry then covered crypto transactions under the ambit of the Prevention of Money Laundering Act (PMLA), however a legal comprehension and exhaustive legislation still remains oblivious. Overlapping of the economic crimes and cryptocurrency thus gives rise to unique crimes and challenges for more evolving legal regulatory bodies and law enforcement. Given India’s drastic digitalization and surging adoption of the cryptocurrencies into the financial sector, there is an urgent call for more evolving laws and regulations to address these challenges.
India’s approach to regulate cryptocurrency has gone under a notable transformation in recent years.
This paper aims to study the application of cryptocurrencies in the financial system and their utilization in the occurrence of the economic offences in India. The study also aims to identify the prevailing legal and regulatory gaps in the financial landscape of India.
[1] Supreme Court of India. (2020, March 4). Internet and Mobile Association of India v. Reserve Bank of India, Writ Petition (Civil) No. 528 of 2018.
[2]Moneycontrol. (2022, July 12). GainBitcoin scam: A cryptocurrency fraud of over Rs 20,000 crore that’s still unfoldin
[3] Press Information Bureau. (2023, March 15). ED seizes crypto assets worth ₹907 crores under PMLA
[4] European Commission. (2023). Markets in Crypto-Assets (MiCA) regulation
[5] U.S. Securities and Exchange Commission. (n.d.). Spotlight on crypto assets.
[6] Monetary Authority of Singapore. (2024). Payment Services Act and digital payment token services.
[7] IMPRI India. (n.d.). Crypto in India: The regulatory framework. Retrieved April 18, 2025
[8]Reuters. (2024, September 11). India leads in crypto adoption for second straight year, report shows. Based on the 2024 Geography of Cryptocurrency Report by Chainalysis.