Regulation of crypto-assets
🔹 I. What Are Crypto-Assets?
Crypto-assets refer to digital representations of value or rights that use cryptography and blockchain technology. They include:
Cryptocurrencies (e.g., Bitcoin, Ethereum)
Stablecoins (e.g., USDT)
Utility Tokens (used within a platform)
Security Tokens (which resemble investment contracts)
Non-fungible tokens (NFTs)
🔹 II. Global Regulatory Challenges
| Key Challenge | Description |
|---|---|
| Classification Uncertainty | Is a token a security, commodity, or currency? |
| Consumer Protection | Risk of fraud, scams, and volatile markets |
| Money Laundering (AML) | Anonymity makes it attractive for illicit use |
| Taxation | Many crypto-holders evade reporting income or capital gains |
| Jurisdictional Conflicts | Crypto operates across borders; enforcement is hard |
🔹 III. United States: Regulation of Crypto-Assets
🔹 A. Regulatory Framework
SEC (Securities and Exchange Commission): Regulates crypto as securities.
CFTC (Commodity Futures Trading Commission): Oversees crypto as commodities.
FinCEN: Enforces anti-money laundering (AML) laws.
IRS: Treats crypto as property for tax purposes.
🔹 B. U.S. Case Law (5+ Cases)
1. SEC v. Ripple Labs Inc. (2020–2023)
Facts: SEC alleged Ripple’s XRP token was an unregistered security.
Issue: Is XRP a “security” under the Howey Test?
Holding:
The court ruled that Ripple’s institutional sales of XRP were securities.
However, XRP sold to retail buyers on exchanges was not a security.
Significance:
✔ A partial win for both sides.
✔ Clarified that context of sale matters.
✔ Highlighted the limits of the SEC’s reach in secondary market transactions.
2. SEC v. LBRY Inc. (2022)
Facts: LBRY sold its LBC tokens to fund development without registration.
Issue: Was this an unregistered securities offering?
Holding:
The court held that LBC tokens were securities.
LBRY violated Section 5 of the Securities Act of 1933.
Significance:
✔ Reinforced that fundraising through token sales triggers securities laws.
✔ Intent or utility of the token is secondary to the economic reality.
3. SEC v. Coinbase Inc. (2023 – Ongoing)
Facts: SEC alleged Coinbase listed and offered trading in unregistered securities (multiple tokens).
Issue: Are tokens like Solana and Cardano securities?
Status:
Case is pending, but raises critical questions about exchange accountability.
Significance:
✔ Challenges the business model of crypto exchanges
✔ Aims to clarify which tokens fall under SEC jurisdiction
4. SEC v. Telegram Group Inc. (2020)
Facts: Telegram raised $1.7 billion for its "GRAM" tokens via SAFT (Simple Agreement for Future Tokens).
Issue: Was this a sale of unregistered securities?
Holding:
Court blocked distribution of tokens, finding that the entire scheme was a securities offering.
Significance:
✔ Courts will examine the entire transaction structure
✔ Even pre-sale agreements (SAFTs) can trigger securities laws
5. Commodity Futures Trading Commission (CFTC) v. Binance Holdings Ltd. (2023)
Facts: CFTC charged Binance for illegal derivatives trading and evading U.S. law.
Holding:
Binance reached settlement, paying over $4 billion.
Admitted violations of CFTC regulations and failure to implement AML controls.
Significance:
✔ One of the largest crypto enforcement actions ever
✔ Confirms that crypto platforms offering derivatives must comply with CFTC rules
🔹 IV. India: Regulation of Crypto-Assets
🔹 A. Regulatory Status
No dedicated crypto law as of 2025.
RBI (Reserve Bank of India): Long opposed crypto, citing financial stability risks.
Income Tax Act: 30% tax on crypto income and 1% TDS on transfers (introduced in 2022).
FIU-IND: Monitors exchanges for money laundering compliance.
🔹 B. Indian Case Law (5+ Cases)
1. Internet and Mobile Association of India v. Reserve Bank of India (2020)
Citation: AIR 2020 SC 1983
Facts: RBI banned banks from providing services to crypto exchanges (2018 circular).
Issue: Was this a violation of Article 19(1)(g) – right to carry on trade?
Holding:
Supreme Court struck down the RBI circular.
Held the circular lacked proportionality and did not show crypto harmed the banking system.
Significance:
✔ Major win for crypto in India
✔ Courts upheld economic liberty over speculative risks
✔ Forced RBI to adopt a more cautious stance
2. Harish BV v. Union of India (2019)
Facts: Crypto trader challenged ED (Enforcement Directorate) seizure of assets under PMLA.
Issue: Was crypto covered under PMLA?
Holding:
The court did not resolve legality of crypto, but allowed enforcement as proceeds of crime.
Significance:
✔ Enforcement actions can proceed even without formal crypto laws
✔ Highlights tension between civil rights and financial surveillance
3. Vishal Jha v. Union of India (2021)
Facts: PIL in Delhi High Court sought regulation or ban of cryptocurrencies.
Issue: Is inaction by the government a constitutional failure?
Status:
Court directed Ministry of Finance to clarify its position.
Significance:
✔ Courts nudged the government to formalize crypto regulations
✔ Demonstrates judicial proactivity in emerging tech law
4. CoinDCX & WazirX Investigations (2022–2023)
Facts: ED investigated leading exchanges for AML violations.
Findings:
Lax KYC, foreign remittances, and suspicious transactions.
Outcome:
Exchanges were fined and asked to register with FIU-IND.
Significance:
✔ Regulatory clarity developing through enforcement, not legislation
✔ Indian authorities apply existing AML laws to crypto
5. Binance v. FIU-IND (2024)
Facts: Binance India challenged its blacklisting for non-compliance with FIU-IND.
Holding:
High Court upheld FIU’s action, citing money laundering concerns.
Significance:
✔ Reiterates that foreign crypto platforms must register and comply with Indian AML law
🔹 V. Comparative Regulatory Approaches
| Category | United States | India |
|---|---|---|
| Legal Classification | Mostly securities or commodities | Not legal tender; taxed as virtual digital assets |
| Key Regulator | SEC, CFTC, FinCEN, IRS | RBI, SEBI, FIU-IND, Income Tax Dept |
| Judicial Oversight | High (Ripple, LBRY cases) | Very high (IAMAI case) |
| AML/KYC Enforcement | Strong via FinCEN & CFTC | Growing via FIU-IND and ED |
| Crypto Taxation | Capital gains & income | 30% tax + 1% TDS on transfer |
| Regulatory Clarity | Patchy and evolving | Limited, but taking shape through court and enforcement |
🔹 VI. Conclusion
The regulation of crypto-assets is still evolving in both jurisdictions. However:
In the U.S., crypto is increasingly treated as a regulated financial instrument, with securities and commodities laws applied through litigation and enforcement.
In India, the Supreme Court has played a pivotal role in protecting crypto activity, even as the government gradually imposes taxation and AML rules.
⚖️ Key Themes:
Courts in both countries play a central role in shaping crypto regulation.
Enforcement-led clarity (rather than proactive legislation) is the current global trend.
The lack of uniform classification continues to cause uncertainty.
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