The Supreme Court has revoked the ban of cryptocurrency imposed by the Reserve Bank of India (RBI) in 2018. Pronouncing the verdict, the three-judge bench of the apex court said the ban was 'disproportionate'. The bench included Justice Rohinton Fali Nariman, Justice S Ravindra Bhat and Justice V Ramasubramanian. The Internet and Mobile Association of India (IAMAI), whose members include cryptocurrency exchanges, and others had approached the top court objecting to a 2018 RBI circular directing regulated entities to not deal with cryptocurrencies.
Advocate Ashim Sood, appearing for IAMI, submitted that Reserve Bank of India lacked jurisdiction to forbid dealings in cryptocurrencies. The blanket ban was based on an erroneous understanding that it was impossible to regulate cryptocurrencies, Sood submitted. The petitioners had argued that the RBI's circular taking cryptocurrencies out of the banking channels would deplete the ability of law enforcement agencies to regulate illegal activities in the industry.
IAMAI had claimed the move of RBI had effectively banned legitimate business activity via the virtual currencies (VCs). The RBI on April 6, 2018, had issued the circular that barred RBI-regulated entities from "providing any service in relation to virtual currencies, including those of transfer or receipt of money in accounts relating to the purchase or sale of virtual currencies".
The verdict would allow companies in the sector to use the banking platform to trade and transact in cryptocurrency. The central bank had contended that allowing cryptocurrency (bitcoins) compromised the integrity of the banking system. When the consistent stand of RBI is that they have not banned VCs and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate,” said Justice Ramasubramanian while writing the 180-page verdict.
“The position as on date is that VCs are not banned, but the trading in VCs and functioning of VC exchanges are sent to comatose by the impugned circular by disconnecting their lifeline namely, interface with the regular banking sector. The crypto asset industry is estimated to have a market capitalisation of approximately $430 billion globally. India is estimated to contribute between 2-10% based on varied estimates. As per the petitioners who challenged RBI’s circular, the total number of investors in Indian crypto market was approximately 20,00,000 and the daily trade volume averaged £15 million in 2018. The bench, however, said RBI has the power to put in place mechanism to regulate the virtual currency sector and rejected the contention that the regulator’s role and power can come into play only if something has actually acquired the status of a legal tender.
