New Delhi: Crypto-currency enthusiasts across the world can heave a sigh of relief with the Supreme Court of India turning down a major Reserve Bank of India directive.
A bench headed by Justice RF Nariman, Justice Rohinton Fali, Justice Ravindra Bhat responding to a case filed by the Internet and Mobile Association of India (IAMAI) is reported as having uplifted a key RBI circular that prohibits several crypto-currrencies such as Bitcoin, Litecoin, Ethereum, Bitcoin Cash, Tether, Ripple etc.
A detailed copy of the judgement is awaited while the bench has allowed filing of writ petitions.
The RBI's circular dated April 6, 2018 discouraged financial organizations from supporting bitcoin and crypto-trading services. In the 2018 circlar, the Reserve Bank of India called crypto-currencies as "illegal" and prohibited "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".
April 6, 2018 RBI circular banning cryptocurrency removed on the ground of "disproportionality": SC— Krishnadas Rajagopal (@kdrajagopal) March 4, 2020
This means there were less invasive methods to curb/control the negative effects of crypto-currency. SC allows petitions challenging the RBI circular @the_hindu
In less than a year, SC delivers a 2nd blow to RBI. In April 2019, J. Nariman-led Bench had quashed a Feb 12 RBI regulation giving lender banks 180-day deadline to either resolve stressed assets or proceed under Insolvency Code against defaulters in loans worth over Rs. 2k cr— Krishnadas Rajagopal (@kdrajagopal) March 4, 2020
This is the second RBI circular within a year that the Supreme Court has turned down. A circular on NPA or bad-loan norms was struck down by the apex court in April 2019. Read that story here.
Everyone wanted to see Mr. Ashim Sood who represented the Crypto side in the Court. Here is the pic on public demand.— Crypto Kanoon (@cryptokanoon) March 4, 2020
From right to left: Mr. Jaideep Reddy (@jrtechlaw), Mr. Ashim Sood, Mr. Harish (@bvharish - Unocoin) and Mr. Mohammed Danish (@DaniAdvocate- Crypto Kanoon). pic.twitter.com/h6vZq8Gd3y
RBI restrictions gone. Lived the moment completely. #indiawinscrypto— Mohammed Danish (@DaniAdvocate) March 4, 2020
With the RBI restriction reportedly gone, the crypto-world is excited on being able to resume trade, although a handful of traders point towards loss of opportunity. The price of a Bitcoin has gone up from $6498 (the day of RBI's circular) to $8813.90 (time of filing this story). Bitcoins struck an astronomical level of $19901 per coin on 17th December 2017.
With the RBI circular diluted, the next pit-stop could be changing perceptions at the finance ministry which has usually likened crypto-currencies to a scam. For instance, Former Finance Minister Arun Jaitley during his 2018 budget speech, said, "The government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities or as part of the payment system."
Subhash Chandra Garg, the current advisor to Andhra Pradesh Chief Minister, Jagan Reddy, likened Virtual currencies to "dabba-trading" [circuit trading]. He made the comments when he was the Chief Secretary for the department of Economic Affairs.
In a written reply on use of bitcoins to the Lok Sabha, Arjun Ram Meghwal, the then MoS for Finance said, "Promotion of Digital economy is in integral part of Government’s strategy to clean the system and weed out corruption and black money. The earlier initiatives of the Government to promote financial inclusion and the Jan Dhan-Aadhaar-Mobile (JAM) trinity were important pre-curser. However, RBI has cautioned the users, holders and traders of Virtual Currencies (VCs), including Bitcoins about the potential financial, operational, legal customer protection and security related risks that they are exposing themselves to. The creation, trading or usage of VCs including Bitcoins, as a medium for payment have not been authorised by the Reserve Bank of India."
The Finance Ministry in a 29th December 2017 release called out Virtual Currencies as Ponzi Schemes. The ministry's statement reads, "The users, holders and traders of VCs have already been cautioned three times, in December, 2013, February, 2017 and December, 2017, by Reserve Bank of India about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to by investing in Bitcoin and/ or other VCs. RBI has also clarified that it has not given any licence/ authorization to any entity/ company to operate such schemes or deal with Bitcoin or any virtual currency. The Government also makes it clear that VCs are not legal tender and such VCs do not have any regulatory permission or protection in India. The investors and other participants therefore deal with these VCs entirely at their risk and should best avoid participating therein."
That detailed release is available here.