Supreme Court Crypto Ruling in India: What the Landmark Decision Means for Traders

Before March 2020, if you wanted to buy Bitcoin in India, you had to find someone willing to trade cash in person. Banks had been ordered to cut off all services to cryptocurrency exchanges. No deposits. No withdrawals. No trading. It wasn’t illegal to own crypto - but it was practically impossible to use it. Then the Supreme Court crypto ruling in India changed everything.

The Ban That Didn’t Add Up

In April 2018, the Reserve Bank of India (RBI) issued a circular banning all banks and financial institutions from providing services to crypto businesses. The move was meant to protect consumers from volatility and fraud. But it didn’t stop people from trading. It just forced them underground. Exchanges like WazirX and CoinDCX lost access to bank accounts. Users couldn’t cash out. The entire ecosystem froze.

The Supreme Court didn’t agree. In March 2020, after a legal challenge from the Internet and Mobile Association of India, the court ruled the RBI’s ban was unconstitutional. The judges said the central bank had no right to impose a blanket ban without evidence of harm to the financial system. The ruling didn’t legalize crypto - it just removed the government’s main tool to shut it down.

This wasn’t a green light. It was a stop sign pulled down. For the first time, Indians could legally use banks to trade Bitcoin, Ethereum, and other digital assets. Within months, user numbers on Indian exchanges jumped by 300-400%. By 2025, an estimated 15 to 20 million Indians owned cryptocurrency - making India one of the top five countries in global adoption.

What the Court Actually Said

The Supreme Court’s decision was built on two key legal principles: proportionality and constitutional rights. The court found that the RBI’s ban was too broad. It punished every crypto user because a few might be involved in fraud or money laundering. That’s like banning all cars because some are used in robberies.

The judges pointed out that no law in India made cryptocurrency illegal. The RBI, as a regulator, couldn’t create its own criminal law. Only Parliament could do that. And Parliament hadn’t acted. So the court stepped in to prevent regulatory overreach.

Justice B.R. Gavai and Justice N. Kotiswar Singh emphasized that innovation shouldn’t be crushed by fear. They warned that shutting down an entire technology sector without clear evidence of harm could hurt India’s digital economy and push talent abroad.

But There’s a Catch - Taxes and Uncertainty

Just because you can trade crypto doesn’t mean it’s easy. The government responded to the court’s ruling not with regulation, but with taxes.

In 2022, India introduced two harsh rules:

• 30% tax on all profits from crypto trades - no deductions, no losses offset, no matter how long you held the asset.
• 1% Tax Deducted at Source (TDS) on every crypto transaction above ₹10,000.

These are among the highest crypto tax rates in the world. Compare that to the U.S., where capital gains tax is based on income and holding period, or the EU, where rules vary but are generally more balanced. In India, even if you make ₹1,000 from trading Bitcoin, you owe ₹300 in tax. And if you buy another coin with that ₹1,000, you pay ₹10 more in TDS - even if you didn’t cash out.

This has created a paradox. The Supreme Court said you can trade. The government says, “Sure, but it’ll cost you.”

What About DeFi, NFTs, and Cross-Border Trades?

The 2020 ruling only cleared the way for basic buying and selling. It didn’t address the newer parts of crypto: decentralized finance (DeFi), non-fungible tokens (NFTs), or crypto-to-crypto swaps. These are now huge in India, but there’s no official guidance on how to report them for taxes.

If you use a DeFi protocol like Uniswap to swap Ethereum for Solana, do you owe tax? If you buy an NFT from a foreign creator, is that a capital gain? The Income Tax Department hasn’t said. Many traders are guessing - and risking penalties.

Legal experts say the lack of clarity is the biggest threat. The Supreme Court removed a ban, but the government hasn’t replaced it with rules. That leaves investors in legal limbo.

What the Court Is Saying Now - 2025

The Supreme Court hasn’t stayed quiet since 2020. In October 2025, the court questioned the government directly about why it hasn’t passed a crypto law after five years. Justice Surya Kant called unregulated Bitcoin trading “nothing but a more polished form of Hawala” - referring to India’s traditional underground money transfer system.

That might sound like a warning. But the court also made it clear: outright bans won’t work. Global finance is changing. Digital assets are here to stay. India can’t afford to ignore them.

The court is now pushing the government to act. It’s not asking for a ban. It’s asking for a framework - one that protects users, prevents fraud, and keeps innovation alive.

Why This Matters for You

If you’re an Indian crypto trader, the 2020 ruling gave you freedom. But freedom without rules is risky.

You can trade legally. But you must:

• Keep records of every transaction - buys, sells, swaps, and transfers.
• Calculate your gains and losses accurately - even if you trade between coins.
• Pay 30% tax on profits, plus 1% TDS on every trade above ₹10,000.
• File your taxes under the “Income from Capital Gains” section.

Many traders are hiring accountants just to handle crypto taxes. Some are using software tools to track transactions across wallets and exchanges. Others are avoiding trades altogether because the tax burden feels unfair.

The result? India has millions of crypto users - but few crypto startups. Companies that build wallets, DeFi apps, or blockchain tools are moving to Singapore, Dubai, or Portugal, where rules are clearer and taxes are lower.

What’s Next?

The government has a draft bill - the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 - that proposes banning private cryptocurrencies and launching a digital rupee. But it’s been stuck for four years.

The Supreme Court is running out of patience. If the government still doesn’t act by early 2026, the court might step in again - this time to set basic rules itself.

For now, the legal status of crypto in India is clear: it’s allowed. But the rules around it are messy, expensive, and uncertain.

The Supreme Court didn’t give you a free pass. It gave you a chance - to trade, to grow, to innovate. Now it’s up to the government to make sure that chance doesn’t turn into a trap.

What You Should Do Today

1. Track every transaction - use a crypto tax tool like Koinly or CoinTracker to log buys, sells, and swaps.

2. Save receipts - keep screenshots of trade confirmations and wallet addresses.

3. Know your tax liability - 30% on gains, 1% TDS on every trade over ₹10,000.

4. Don’t ignore filings - even small trades need to be reported.

5. Stay updated - the government could change rules at any time. Follow the Supreme Court’s next hearings.

The ruling in 2020 opened the door. Don’t let confusion close it.