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The Supreme Court today struck down a circular issued by the Reserve Bank of India (RBI) which directed banks not to deal in transactions involving cryptocurrency (Internet Mobile Association of India v. Reserve Bank of India).
In April 2018, the Reserve Bank of India had issued a circular barring banking and financial services from dealing in transactions involving virtual currency or Cryptocurrency such as BitCoin. It was this circular that was challenged before the Supreme Court by Internet Mobile Association of India (IAMAI).
Today's judgment was rendered by the Bench of Justices Rohinton Nariman, Aniruddha Bose, and V Ramasubramanian.
The Bench allowed the petition on the ground of proportionality. The Court said,
The petitioners are entitled to succeed and the impugned Circular dated 06-04-2018 is liable to be set aside on the ground of proportionality.
It was the case of the petitioners that Cryptocurrency is like a commodity and is not a currency, as the name suggests. Therefore, the RBI ought to have treated it as such. Cryprocurrency is like "casino chips" and not like actual currency, it was contended.
Cryptocurrency, as is, faces no ban from the RBI and the circular in question had only barred banking services from "providing any service in relation to virtual currency". This stand was made clear by the RBI before the Apex Court, before which it was stressed that the circular does nothing to ban the actual cryptocurrency.
The RBI argued that imposing a ban on banking services from dealing in cryptocurrency is well within its domain. Further, the same was being done to prevent the cryptocurrency industry from affecting payment services in India.
However, the petitioner organisation argued that without a specific and explicit ban against cryptocurrency, any trade in the virtual currency was legal within the ambit of the Constitution of India. In fact, a ban of this nature would remove cryptocurrency trade from the formal economy and give rise to the same being traded through black market transactions, it was argued.
The Court had reserved its order in the matter in January this year.
The petitioners were represented by Advocate Ashim Sood (briefed by Nishith Desai Associates) and Senior Advocate Nakul Dewan (briefed by Ikigai Law). RBI was represented by Senior Counsel Shyam Divan (briefed by AZB & Partners).