Crime Today News
The Supreme Court has dismissed a petition requesting it to exercise its jurisdiction under Article 142 of the Constitution and issue guidelines for the prevention and penalising of fraudulent transactions involving crypto currencies.
The Bench of Justice BR Gavai and Justice AG Masih rejected the plea on the grounds that the relief sought in the prayers fell within the domain of the legislature and the executive.
The top court of the country granted liberty to the petitioners to make a representation either before the Government of India or an appropriate authority, while directing the concerned authority to decide the same in accordance with law.
The Counsel appearing for the petitioners contended that the plea sought a regulatory framework for crypto currency dealings.
Referring to the decision made in Internet and Mobile Association of India vs RBI, she argued that the Court has already upheld the fundamental rights of persons dealing with crypto currencies as virtual assets. Under the tax law, crypto currency was characterized as a ‘property’.
Noting that the issue fell in the domain of policymakers, the Apex Court observed that it could neither issue any directions, nor lay down the law.
The counsel apprised the Bench that various petitioners had approached the local crime branch and policy authorities, however, they all received the same reply that there was no regulatory framework.
When the Counsel pressed for laying down of guidelines, as the Court did in other cases where there was a legal vacuum (like Vishakha vs State of Rajasthan), the Bench said that around two weeks back, Solicitor General Tushar Mehta argued that the Supreme Court and the High Courts could not lay down guidelines in every matter.
Filed through Advocate-on-Record Priyanka Prakash, the plea contended that investors and registered users of respondent No. 8-WazirX (a cryptocurrency exchange platform), said that they maintained wallets with the platform.
They reportedly invested substantial sums therein, however in July 2024, the platform declared that there was a cyberattack on one of its multi-signature wallets, which resulted in an alleged loss of more than 230 million dollars. The platform unilaterally decided to distribute losses from the ERC-20 token theft across its entire user base, including non-users of the said token. The aggrieved petitioners then approached the Court.
The petition claimed that the systemic failure to ensure secure crypto currency transactions posed a serious threat to the integrity and financial security of the nation.
In context of the USD 230 million scam, the petitioners contended that they were deprived by the State of their fundamental rights under Articles 14, 19(1)(g) and 21, as there was neglection of the ‘colossal’ breach of trust and ‘fiduciary duty’ of respondent No. 8, which was one of the country’s most prominent crypto currency exchange platforms.
They further submitted that they were aggrieved by the inaction and failure of regulatory authorities (Respondent Nos. 1 to 7) to intervene decisively and protect the interests of Indian investors in the cryptocurrency sector.
The lack of a comprehensive regulatory framework and effective redressal mechanism resulted in widespread financial insecurity, loss of trust and systemic risk within the digital asset industry, they noted.
Terming the cyberattack as not just a security breach, but a potentially orchestrated crime facilitated by serious internal failures and regulatory lapses, the petitioners claimed that the respondents, particularly WazirX, failed to implement robust Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols as mandated under the Prevention of Money Laundering Act (PMLA).
They said there were no laws in India to protect the users, investors or entrepreneurs dealing with crypto currencies. Lack of legal framework posed difficulty to investors in case of fund freezes and platform shutdowns.
There was no relief to customers in the event of collapse of unregulated exchanges. There was no defined jurisdiction and uncertainty as to where to approach in case of disputes between investors and exchanges, added the petitioners.
Drawn by Advocates Anjali Anil and Radhika Prasad, the plea contended that there was uncertainty regarding the legal consequences of non-compliance of crypto exchanges to KYC requirements and PML/CFT measures.
The petitioners sought the formulation of guidelines, to be followed by both crypto currency exchanges operating in India, as well as regulatory authorities in cases of financial misappropriations involving crypto currency transactions.
Settled by Advocate Maitreyi S Hegde, the plea sought the appointment of a committee/officer to assess damages incurred by the petitioners (and other users), disbursement of the same, and appropriate compensation/full value of tokens/tokens within a fixed time frame.
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