GUWAHATI: The Supreme Court has dismissed a petition that sought the formulation of guidelines to prevent and penalise fraudulent cryptocurrency transactions, invoking its powers under Article 142 of the Constitution. A bench comprising Justices BR Gavai and AG Masih ruled that the matters raised fall within the remit of the legislature and executive, and not the judiciary.
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The court, however, permitted the petitioners to approach the relevant authorities with a representation, to be considered in accordance with the law.
According to a LiveLaw report, counsel for the petitioners argued that the absence of a clear regulatory framework for cryptocurrency dealings in India posed significant legal and financial risks. She cited the Court’s earlier judgment in Internet and Mobile Association of India v. RBI, where the Court had acknowledged the fundamental rights of individuals involved in cryptocurrency transactions. The counsel noted that despite the tax classification of cryptocurrencies as “property”, there is currently no statute in place to regulate the sector.
However, Justice Gavai rejected the plea for judicial intervention, stating that framing such regulations is a matter for policymakers. “That is in the domain of policymakers, how can we issue any such directions? We can't lay down the law,” he remarked.
The petitioners had also raised concerns about the absence of redressal avenues, noting that local crime branch and police authorities had declined to intervene on the grounds of lacking a legal framework. Justice Gavai responded by suggesting that the petitioners should make a representation to the Government of India.
Furthermore, when counsel attempted to invoke the Court’s precedent in Vishakha v. State of Rajasthan, where guidelines were laid down in the absence of specific legislation, Justice Gavai dismissed the comparison. “How can we do that?” he said, referring to a recent argument by the Solicitor General that neither the Supreme Court nor the High Courts can prescribe guidelines in every matter.
The case stemmed from a large-scale loss involving respondent No. 8—WazirX, a cryptocurrency exchange platform. The petitioners, investors and registered users of the platform, alleged that in July 2024, WazirX announced a cyberattack on one of its multi-signature wallets, leading to a reported loss exceeding 230 million dollars. Following this, the platform unilaterally imposed the burden of the ERC-20 token theft across all users, including those who had no dealings with that specific token.
The petitioners argued that this amounted to a denial of their fundamental rights under Articles 14, 19(1)(g), and 21, and accused WazirX of breaching its fiduciary obligations. They also criticised the regulatory authorities—respondents 1 to 7—for their failure to act or offer safeguards for Indian investors, claiming this inaction has led to a systemic threat within the digital asset ecosystem.
According to the petition, the cyberattack was not just a security failure, but potentially a coordinated offence facilitated by internal lapses and weak regulatory oversight. They alleged that WazirX had failed to implement proper Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols as required under the Prevention of Money Laundering Act.
The petition called for a judicial framework that would establish operational standards for cryptocurrency exchanges and regulatory bodies, and requested the appointment of a committee to assess investor losses and oversee compensation. It also underlined the absence of statutory protections for users in cases of platform failures, fund freezes, or disputes between investors and exchanges.
