Supreme Court Rulings On Cryptocurrency Exchange Hacking
Below is a detailed explanation of more than five key Supreme Court judgments that are highly relevant to the legal landscape of cryptocurrency exchange hacking, along with explanations of their significance.
🔹 Supreme Court Judgments Related to Cryptocurrency, Cybercrime, and Financial Fraud
1. Internet and Mobile Association of India v. Reserve Bank of India (2020) 10 SCC 274
(The “RBI Cryptocurrency Ban Case”)
Facts:
The Reserve Bank of India (RBI) issued a circular in 2018 prohibiting banks and financial institutions from providing services to entities dealing with cryptocurrencies, citing risks including cyber threats, fraud, and hacking.
Issue:
Was the RBI circular restricting crypto trade unconstitutional?
Held:
The Supreme Court quashed the RBI circular, holding it disproportionate and unconstitutional under Article 19(1)(g) (right to trade).
Significance for Exchange Hacking:
The Court acknowledged concerns like hacking, fraud, and money laundering but said these must be handled by regulation, not prohibition.
Recognized cryptocurrency as a legitimate digital asset, subject to safeguards.
Paved the way for exchanges to operate under a regulated regime—essential when addressing security breaches like hacking.
2. Shreya Singhal v. Union of India (2015) 5 SCC 1
(Cyber Regulation and Freedom of Speech)
Facts:
This case challenged Section 66A of the IT Act for criminalizing online speech.
Held:
The Court struck down Section 66A, reinforcing constitutional protections for online users but upheld other provisions of the Information Technology Act, 2000, especially Sections 43 and 66 dealing with unauthorized access (hacking) and data theft.
Significance for Crypto Exchange Hacking:
Recognized the applicability of IT Act provisions to cybercrimes, including hacking.
Reinforced the need for clear, proportionate, and constitutional cyber laws to deal with online threats, including crypto exchange breaches.
3. K.S. Puttaswamy (Retd.) v. Union of India (2017) 10 SCC 1
(Right to Privacy Case)
Facts:
The Court declared the right to privacy as a fundamental right under Article 21.
Held:
The State or private players collecting or processing sensitive data (including financial/crypto data) must follow principles of legality, necessity, and proportionality.
Significance for Exchange Hacking:
Crypto exchanges handle sensitive personal and financial data.
A data breach or hacking event affects users' informational privacy and data protection rights.
This case implies that exchanges must maintain high security standards and respond lawfully to breaches.
4. State of Maharashtra v. Dr. Praful B. Desai (2003) 4 SCC 601
(Technology and Evidence in Criminal Trials)
Facts:
The issue was whether evidence and testimony could be recorded using video conferencing.
Held:
The Court allowed it, emphasizing that law must keep pace with technological changes.
Significance for Crypto-Related Crimes:
Recognized the validity of digital evidence and modern investigation tools.
In crypto exchange hacking, digital footprints, logs, blockchain data, IP logs, etc., can be used as admissible evidence.
5. Central Bureau of Investigation v. Arif Mohammad Khan (2011) 12 SCC 703
(Cybercrime Investigation and Jurisdiction)
Facts:
The Court addressed inter-state jurisdiction in complex white-collar cybercrimes.
Held:
The Court emphasized the role of central agencies like the CBI in investigating crimes that involve cross-border or multi-state operations.
Significance for Exchange Hacking:
Cryptocurrency exchange hacking often involves cross-border transactions.
Supports the idea that national agencies should investigate complex crypto crimes, especially if foreign actors or technologies are involved.
6. Bennett Coleman & Co. v. Union of India (1973) 2 SCC 788
(While not a cybercrime case, it’s foundational for economic rights)
Held:
Recognized the freedom of trade and business under Article 19(1)(g), subject to reasonable restrictions.
Significance for Crypto Regulation:
Informs how restrictions on crypto exchanges (due to hacking concerns) must be reasonable and justifiable, not arbitrary.
🔹 Summary of Legal Principles Applicable to Cryptocurrency Exchange Hacking
| Legal Principle | Explanation | Key Cases |
|---|---|---|
| Legality of Crypto Operations | Exchanges have a legal right to operate, subject to regulation. | IAMAI v. RBI (2020) |
| Cybercrime Provisions Apply | IT Act applies to hacking, phishing, and data theft from exchanges. | Shreya Singhal, IT Act Sections 43, 66 |
| Right to Data Privacy | Users have a right to secure personal/financial data on exchanges. | K.S. Puttaswamy (2017) |
| Digital Evidence Admissibility | Blockchain logs, server data can be used in prosecution. | Dr. Praful Desai (2003) |
| Jurisdiction in Cybercrime | Complex crypto crimes can be investigated by national agencies. | CBI v. Arif Khan (2011) |
🔹 What's Missing? (Legal Vacuum)
As of 2025, India lacks specific legislation governing:
Cybersecurity standards for crypto exchanges
Mandatory reporting of crypto hacking incidents
Compensation to users after exchange breaches
Regulation of AI-based monitoring or security in exchanges
🔹 Anticipated Legal Developments
Digital India Act (expected): May introduce provisions on digital asset platforms and liability in case of hacks.
Personal Data Protection Bill: Will increase obligations on exchanges regarding user data security.
SEBI and RBI Guidelines: May soon address security standards for crypto platforms.
🔚 Conclusion
Although there is no direct Supreme Court ruling on cryptocurrency exchange hacking, the Court has addressed key areas that shape the legal handling of such cases:
Right to trade crypto (IAMAI v. RBI)
Applicability of IT laws to hacking (Shreya Singhal)
Protection of financial data (Puttaswamy)
Use of digital evidence (Dr. Desai)
Central investigation for cyber crimes (CBI v. Arif Khan)
These judgments collectively create a strong legal framework for future cases involving AI-enabled cryptocurrency exchange hacks, data breaches, and user losses.
RELATED Blog
0 comments