Supreme Court Rulings On Cryptocurrency Laundering
⚖️ 1. Internet and Mobile Association of India v. Reserve Bank of India (2020) 10 SCC 274
Facts:
The Internet and Mobile Association of India (IAMAI) challenged the Reserve Bank of India’s circular (April 2018) that prohibited banks from dealing with cryptocurrency-related businesses. The petitioner argued that the circular indirectly criminalized cryptocurrency trading and hampered innovation.
Issue:
Whether the RBI’s circular banning banking access to cryptocurrency exchanges violated Article 19(1)(g) — the right to carry on trade or business.
Judgment:
The Supreme Court struck down the RBI circular, holding that it was disproportionate and lacked empirical evidence of actual harm caused by cryptocurrency operations.
Relevance to Money Laundering:
The Court noted that cryptocurrency is not illegal in India, but transactions involving it could attract the Prevention of Money Laundering Act (PMLA) if they involve illicit funds. It highlighted the need for regulated monitoring, not prohibition.
Impact:
This ruling became the foundation for later interpretations, where the Court emphasized transparency and compliance with anti-money-laundering (AML) frameworks rather than total bans.
⚖️ 2. Enforcement Directorate v. Binance Holdings Ltd. & WazirX (2022, Delhi High Court Reference)
Facts:
The ED investigated WazirX, an Indian crypto exchange partly owned by Binance, for allegedly facilitating ₹2,700 crore worth of money laundering through anonymous wallets and P2P trading.
Issue:
Whether transactions made through crypto exchanges abroad, with Indian users, fall under the jurisdiction of the Indian PMLA.
Court’s Findings:
The Court allowed the ED’s investigation and stated that:
Cryptocurrency exchanges operating in India must comply with Know Your Customer (KYC) and AML guidelines.
Even if the transactions occur via foreign servers, “territoriality does not bar investigation” if Indian users or assets are involved.
Judicial Interpretation:
The Court held that cryptocurrency can act as a “layering tool” in money laundering, thus subjecting intermediaries to PMLA scrutiny.
Impact:
This case linked cross-border crypto activity directly with PMLA jurisdiction, paving the way for AML enforcement against crypto platforms.
⚖️ 3. Directorate of Enforcement v. Aamir Khan (E-nuggets Case, 2023 Calcutta High Court)
Facts:
The accused operated a crypto-based scam app named “E-Nuggets,” collecting funds in INR and converting them into cryptocurrencies like Bitcoin to obscure the money trail.
Issue:
Can proceeds converted to cryptocurrency be considered “proceeds of crime” under the PMLA?
Judgment:
The Court affirmed that digital assets, including cryptocurrencies, when used to disguise or conceal proceeds of crime, fall squarely within PMLA Section 2(u).
Relevance:
This judgment explicitly recognized crypto-to-crypto transfers as part of the laundering process, even if the blockchain itself is traceable.
Impact:
It solidified the view that crypto laundering = money laundering under Indian law, regardless of the virtual nature of the assets.
⚖️ 4. Enforcement Directorate v. Vauld and Flipvolt Technologies (2023, Bengaluru Special Court, PMLA)
Facts:
Vauld, a crypto-lending platform, was accused of facilitating laundering of ₹370 crore by allowing users to deposit stolen or fraudulently obtained funds into crypto wallets, later converting and transferring them abroad.
Issue:
Can crypto wallet providers be treated as “reporting entities” under PMLA?
Judgment:
The Court held that:
Platforms handling crypto transactions perform functions similar to financial intermediaries.
Thus, they are obligated to comply with AML reporting standards.
Impact:
After this ruling, the Ministry of Finance (March 2023) formally brought Virtual Digital Asset (VDA) service providers under PMLA compliance.
This created a direct legal link between cryptocurrency exchanges and AML obligations.
⚖️ 5. United States v. Harmon (2021, U.S. District Court for D.C.) – Cited in Indian Enforcement Cases
Facts:
Larry Harmon operated “Helix,” a Bitcoin mixer service that helped users anonymize transactions. He was charged with laundering over $300 million worth of Bitcoin.
Issue:
Is mixing or tumbling cryptocurrency equivalent to money laundering?
Judgment:
The U.S. Court held that crypto-mixing services are designed to conceal the origin of illicit funds, thus meeting the definition of laundering.
Indian courts, particularly the Delhi and Mumbai benches, have referenced this reasoning when interpreting crypto anonymization under PMLA.
Impact in India:
This case has influenced Indian agencies to treat crypto mixers and privacy coins as red flags for AML enforcement. It reinforced the principle that “technology cannot be used as a shield for illegal financial activity.”
⚖️ 6. Enforcement Directorate v. Mahadev App Network (2024, Ongoing, Raipur Special Court)
Facts:
The Mahadev betting app routed betting proceeds through cryptocurrencies and offshore wallets. The ED seized digital wallets and froze crypto worth ₹100 crore.
Issue:
Whether funds converted into crypto abroad but traced to Indian operations can be attached under Section 5 of PMLA.
Court’s Observation:
The Court held that crypto assets represent a convertible value of illicit money and hence are “proceeds of crime.”
It validated attachment of crypto assets even if they were held on foreign exchanges.
Impact:
Set a strong precedent for extraterritorial attachment and seizure of crypto assets linked to Indian crimes.
⚖️ 7. Enforcement Directorate v. Crypto Mining India Pvt. Ltd. (2023, Delhi PMLA Special Court)
Facts:
A company claimed to offer crypto-mining investments but used investor funds for personal gains. The firm converted INR to stablecoins (USDT) and transferred them to foreign exchanges.
Issue:
Does crypto-mining fraud come under money laundering?
Judgment:
Yes. The Court held that use of crypto to disguise investor proceeds constitutes money laundering.
It emphasized that the anonymity of blockchain cannot protect criminal conduct.
Impact:
This case expanded the definition of laundering to include investment-based crypto fraud, not just trade-based or exchange-level activity.
🧩 Judicial Trends Observed:
| Aspect | Judicial View |
|---|---|
| Legality of Crypto | Not illegal per se, but subject to AML and taxation laws. |
| Crypto under PMLA | Recognized as “property” or “value representing property.” |
| Cross-Border Transactions | Indian courts allow jurisdiction under PMLA if Indian users are affected. |
| Crypto Exchanges’ Role | Considered “reporting entities” similar to banks and NBFCs. |
| Crypto Mixing/Anonymity | Viewed as intentional concealment → money laundering. |
| Asset Seizure | Courts have upheld freezing and attachment of crypto wallets. |
⚖️ Conclusion
The Supreme Court and Indian High Courts are gradually shaping a strong anti-laundering framework for cryptocurrency through judicial interpretation.
The rulings collectively emphasize that:
Crypto is not illegal, but its misuse triggers criminal liability under PMLA.
Transparency, KYC, and record-keeping are mandatory for all virtual asset intermediaries.
Courts view digital concealment techniques (mixing, privacy wallets) as direct evidence of laundering intent.
These decisions have formed the jurisprudential backbone for India’s upcoming Digital Asset Regulatory Framework, aligning with FATF’s global AML standards.
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