Supreme Court Permits Trading in cryptocurrency and quashed Reserve Bank of India Ban

Internet and Mobile Association of India v. Reserve Bank of India

Supreme Court in its judgement dated 4 March 2020 allowed dealing in virtual currence including cryptocurrencies and quashed the Reserve Bank of India (RBI) circular dated 6 April 2018 that banned trade of cryptocurrencies thus restricting lenders from facilitating transactions for cryptocurrency traders. Firms that were dealing in cryptocurrency were earlier told to wind up within 3(three) months and this led to the shutting down of many start-ups. Thus the decision permitting trading and banking transactions in cryptocurrencies is welcome by the cryptocurrency exchanges.

Judges: The case was decided by a three judge bench of Justice Rohinton Nariman, Justice Aniruddha Bose and Justice V Ramasubramanian.

Respondent Arguments

  • RBI had said that cryptocurrencies raised concerns of consumer protection, market integrity and money laundering.
  • RBI contended that it would be risky to deal with such virtual currencies and thus there would be a ban to avoid any harm to the financial system. Government declared cryptocurrencies as not legal tenders
  • The Government of India through a draft bill, Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, stated that trading in cryptocurrency would lead to fine and imprisonment up to ten (10) years. The fine recommended could reach up to INR 25 (twenty five) crore. In January 2018, the Finance Minister held that cryptocurrency would not be deemed to be a legal tender.
  • The government highlighted the person risk in dealing with cryptocurrencies.
  • This move by the government severely affected several cryptocurrency exchanges across the country.
  • There was a ban for two years since April 2018.

Petitioner arguments

  • This was a petition by the Internet and Mobile Association of India challenging the circular dated 6 April 2018 which banned such trading.
  • It was submitted that India should also follow other nations where not only trading is permitted in cryptocurrency but also those countries have their own virtual currency.
  • The ban was challenged on grounds of proportionality thus arguing that cryptocurrencies could be referred to as medium of exchange.
  • The petitioners submitted that trading in cryptocurrencies would be a legitimate business activity.
  • The circular violated the petitioners right under Article 19(1)(g) of the Constitution to carry on their trade, occupation and business.
  • The RBI had also acted arbitrarily beyond their scope.
  • The circular restricted petitioner to access their own money to trade which was legal.

Judgement

  • The Supreme Court held that the impugned measures were not proportional and the RBI circular dated 6 April 2018 was held to be unconstitutional.

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